Jessica Alba’s Honest Co. To Explore An IPO
Last fall, donbleek.com reported that American television/film actress and model turned entrepreneuress Jessica Alba is running a billion dollar empire. Her Honest Company was reportedly value at about $1.7 billion when we broke the story here.
We added that Alba was expanding the Honest Company (a company of non-toxic baby and homecare products). She launched a new beauty line, Honest Beauty. The range contains 17 skin care products — cleansers, a facial mist, moisturizers, wipes, etc. — and a whopping 66 makeup products, including foundations.
Last month, we reported that the Honest Company will soon release a line of hair products – for grown-ups, of course (see it here).
In the brand’s latest news, we are hearing that Alba‘s Honest Co. may be entering sell mode, in addition to the original plan for an initial public offering. According to WWD, “The company hired Morgan Stanley and Goldman, Sachs & Co. to explore an IPO, but now is also said to be considering an M&A transaction, considering the continued coolness of the public markets, according to sources. The shift is a logical one given the volatility of the public markets, though several financial experts suggest Honest may still decide to float shares. Many companies that mull a public offering simultaneously contemplate a sale as part of a dual-track process. The final decision generally depends on which option provides a higher valuation.”
In today’s market, a sale would be better than an IPO. “Given the scale of the company and the volatility in the capital markets, my guess would be a deal would probably be more attractive than the IPO,” said Martin Okner, managing director at SHM Corporate Navigators.
A source said to WWD, “Given Honest’s focus on household and baby products, potential buyers could include Procter & Gamble, Johnson & Johnson, Kimberly Clark, Unilever, Colgate and L’Oreal.”
“Valuations for consumer goods companies can run to two or 2.5 times sales. For something with a huge growth trajectory, which Honest is seen as having, those multiples could climb as high as three or 3.5 times,” Okner said. “With sales between $250 million and $300 million, according to sources, Honest could end up with a $500 million valuation on the conservative side, or $1.05 billion valuation on the higher side.”
“Honest has about $222 million in venture capital backing. Its most recent round in 2015 valued the company at about $1.7 billion — which is enough to deter further VC investors from putting more money in, financial experts have said.”
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