High Ridge, Owner of Mass-Market Beauty Brands, Files for Bankruptcy, Plans Sale
High Ridge Brands, the owner of Alberto Vo5 hair products and Zest soaps, has filed for Chapter 11 bankruptcy protection, hoping to sell the company.
"Following a thorough review of the options available to us, we have made the decision to execute a court-supervised sales process in order to maximize the value of our strong brands," High Ridge chief executive officer Patricia Lopez said in a statement. "As we move forward, we remain focused on our mission of crafting extraordinary experiences for savvy consumers through our hair care, skin cleansing and oral-care products."
Before the bankruptcy, PJT Partners LP was hired to try to sell the business. Several parties were interested, according to court papers, but none were able to work on the company's timeline. After extending waivers on its loans, High Ridge filed for bankruptcy with plans to execute a sale.
The business said it has a commitment for $20 million in debtor-in-possession financing from existing lenders. The company said if that loan is approved, it should be able to service customers and suppliers.
The business was originally formed as a private equity play, in order to acquire Zest from Procter & Gamble in 2011. Gradually, the business picked up other companies, including White Rain, LA Looks and Dr Fresh, its most recent acquisition in 2016. Because of the products' low price points, the goal was to minimize back-end costs by optimizing supply and logistics and sell big volumes, the company said in court papers.
It was initially formed by private equity firm Brynwood Partners, which sold the company to Clayton, Dubilier and Rice at a value of $415 million in 2016.
High Ridge started to struggle as mass market dynamics shifted, the company said in court papers.
High Ridge said its brands were hurt due to "shifting consumer preferences and a strong economy that led to a reduction in shelf space allotted to value priced products."
The company's brands are sold through food and drug and dollar-store-channels, primarily. The business ended 2018 with $301.1 million in net sales and a $62.5 million loss.
High Ridge said its oral-care brands are stable, but its hair and skin brands have been declining. Those declines in skin and hair, which make up a significant part of the product portfolio, drove High Ridge to attempt to pump more trend-driven innovation into the product lines. But that innovation also demanded marketing spend, the company said in court papers.
At the same time as High Ridge was juggling those innovation projects and costs, the company saw a 60 percent price hike from its soap bar manufacturer, and took nine months to find a new one, according to court papers. During that period, High Ridge wasn't able to product enough bars of soap to meet demand, and in March 2019, was only delivering 54 percent of soap orders on time and in full.
High Ridge filed for bankruptcy on Dec. 18 in the U.S. Bankruptcy Court for the District of Delaware. A first-day hearing is set for Dec. 19, with Judge Brandan Shannon.
While many segments of the beauty sphere have been boosted by the advent of social media and influx of influencers, there are some brands that have struggled. That provides an opportunity for distressed investors in beauty, experts say.
In 2018, Glansaol, the Warburg Pincus-backed owner of Julep, Laura Geller and Clark's Botanicals filed for bankruptcy protection and was eventually bought for about $18 million by a group formed by Joey Shamah, the founder of E.l.f. Beauty. There's also Avon, which has struggled in North America and abroad, with both segments recently finding new homes. Revlon, too, has faced sales declines across all divisions except for Elizabeth Arden. That business is trying to sell all or parts of the company, and has an upcoming loan maturity in 2021.
For more from WWD.com, see:
Risky Business: An Influx of Troubled Companies Means M&A for Investors Willing to Gamble
Inside Waterless Beauty: How Brands are Rethinking Water Conservation
Behind IFF's $26 Billion Wellness Bet
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