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Waldencast Acquisition Corp.

Waldencast Acquisition Corp.

Feb 22, 2021 by Kristi Marvin

PROPOSED BUSINESS COMBINATION: Obagi and Milk Makeup

ENTERPRISE VALUE: $1.2 billion
ANTICIPATED SYMBOL: WALD

Waldencast Acquisition Corp. proposes to combine with Obagi, an industry-leading, advanced skincare line positioned in the high-growth dermo-cosmetic category and recognized for its clinical excellence, innovation, and science-backed approach, and Milk Makeup, a high-growth, cult-favorite beauty brand among Gen-Z consumers and a leader in clean beauty known for its strong community, cultural relevance, and iconic products.

Obagi:

  • Obagi is an industry-leading, advanced skin care line formulated with scientifically proven ingredients, refined with a legacy of 30 years’ experience.
  • First known as leaders in the treatment of hyperpigmentation with the Obagi Nu-Derm® System, Obagi products are designed to restore skin’s natural radiance by visibly improving balance, tone and texture, and diminishing the appearance of premature aging, photodamage, skin discoloration, acne, and sun damage.

Milk Makeup:

  • Founded in 2016, Milk Makeup quickly became a cult-favorite among the beauty community for its values of self-expression and inclusion, captured by its signature Live Your Look, its innovative formulas and clean ingredients.
  • The brand creates vegan, cruelty-free, clean formulas from its Milk Makeup HQ in Downtown NYC. Currently, Milk Makeup offers over 300 products through its US website, and its retail partners including Sephora in North America, Europe, the Middle East and Australia and Cult Beauty and Selfridges in the UK.

SUBSEQUENT EVENT – 7/15/22 – LINK

  • On July 15, 2022, Waldencast entered into subsequent subscription agreements with certain investors on the same terms as the Initial PIPE Investors.
  • Pursuant to the July Subsequent PIPE Investors have collectively subscribed for 500,000 shares of Waldencast Common Stock for an aggregate purchase price equal to $5,000,000.
  • Waldencast also entered into a Promissory Note (the “Working Capital Loan”) with its sponsor, Waldencast Long-Term Capital LLC.
  • Pursuant to the Working Capital Loan, the Sponsor has agreed to loan to Waldencast up to $450,000 to be used for working capital purposes.

SUBSEQUENT EVENT – 6/27/22 – LINK

  • Waldencast Acquisition Corp. announced that, on June 24, 2022, its wholly-owned subsidiary Waldencast Finco Limited entered into a Credit Agreement, by and among Waldencast Finco, as the borrower, Waldencast Partners LP, as the parent guarantor, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent.
  • Credit Suisse AG, New York Branch acted as documentation agent and JPMorgan Chase Bank, N.A., Banco Santander, S.A. and Wells Fargo Securities, LLC acted as joint book-runners and joint lead arrangers.
  • As a result of the entry into the Waldencast Credit Agreement, Waldencast will receive aggregate proceeds of up to approximately $1.02 billion (if no Waldencast shareholders exercise their rights to redeem their shares).
  • This includes, in addition to the $225m debt facility described above, the following previously announced commitments:
    • Forward Purchase Agreements with Burwell Mountain Trust, Dynamo Master Fund (each members of Waldencast Long-Term Capital LLC, Waldencast’s sponsor) and Beauty Ventures LLC in the aggregate total amount of $333 million.
    • PIPE commitments with certain PIPE investors in the aggregate total amount of $113 million.
    • Waldencast’s SPAC proceeds of $345 million (if no Waldencast shareholders exercise their right to redeem their shares).

SUBSEQUENT EVENT – 6/15/22 – LINK

  • On June 14, 2022, Waldencast entered into subsequent subscription agreements with certain investors.
  • The Subsequent PIPE Investors have collectively subscribed for 800,000 shares of Waldencast Common Stock for an aggregate purchase price equal to $8,000,000, bringing the total PIPE Investment to $112,000,000.
  • The PIPE Investment will be consummated substantially concurrently with the closing of Waldencast’s initial business combination.

TRANSACTION

  • The transaction is valued at a proforma enterprise value of approximately $1.2 billion. The transaction will be funded by $345 million of IPO cash proceeds (subject to any redemptions); a fully committed $333 million Forward Purchase Agreement of which $160 million is provided by the sponsors (Waldencast Long-Term Capital LLC and Dynamo Master Fund); a fully committed $105 million PIPE priced at $10.00 per share; and $475 million of Seller rollover equity.
  • Obagi’s and Milk Makeup’s existing shareholders are expected to hold equity of 20.5% and 14.9% respectively (without giving effect to any redemptions), in Waldencast.
  • The transaction includes significant sponsor alignment with other shareholders in the form of the $160m FPA committed capital. Notably, the leadership team of Waldencast will directly operate the combined business with a focus on driving growth and shareholder value.

Waldencast Transaction Overview

PIPE

  • Subsequent Event – On July 15, 2022, Waldencast entered into subsequent subscription agreements with certain investors on the same terms as the Initial PIPE Investors. Pursuant to the July Subsequent PIPE Investors have collectively subscribed for 500,000 shares of Waldencast Common Stock for an aggregate purchase price equal to $5,000,000, bringing the total PIPE Investment to $118,000,000.
  • Subsequent Event – On June 14, 2022, The Subsequent PIPE Investors have collectively subscribed for 800,000 shares of Waldencast Common Stock for an aggregate purchase price equal to $8,000,000, bringing the total PIPE Investment to $113,000,000.
  • Waldencast entered into initial subscription agreements with certain investors, pursuant to which the Initial PIPE Investors have collectively subscribed for 10,500,000 shares of the Waldencast Common Stock for an aggregate purchase price equal to $105,000,000.

FORWARD PURCHASE AGREEMENT

  • The transaction will be funded by a fully committed $333 million Forward Purchase Agreement of which:
    • $160 million at $10.00 per share is provided by the sponsors (Waldencast Long-Term Capital LLC and Dynamo Master Fund)
    • $173 million at $10.00 per share is provided by Third-Party investors (of which the Sponsor is the managing member).

LOCK-UP

  • The Transaction Agreements contemplate that, at the Closing, the Lock-Up Stockholders will enter into the Obagi Lock-Up Agreement and Milk Lock-Up Agreement, as applicable, (together, the “Lock-Up Agreements”), pursuant to which they will agree not to transfer, assign or sell during the respective Lock-Up Period until the earlier of:
    • Waldencast Lock-Up:
      • (A) one year after the Closing and
      • (B) if the last reported sale price of the Waldencast Common Stock equals or exceeds $12.00 per share (as adjusted for share sub-divisions, share dividends, rights issuances, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the date hereof
    • Obagi Lock-Up:
      • (A) one year after the date hereof and
      • (B) if the last reported sale price of the Domesticated Acquiror Common Stock equals or exceeds $12.00 per share (as adjusted for share sub-divisions, share dividends, rights issuances, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the date hereof
    • Milk Lock-Up:
      • (A) one year after the date hereof and
      • (B) if the last reported sale price of the Domesticated Acquiror Common Stock equals or exceeds $12.00 per share (as adjusted for share sub-divisions, share dividends, rights issuances, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the date hereof

NOTABLE CONDITIONS TO CLOSING

  • Obagi:
    • Conditions to Obagi’s obligation to consummate the Merger include that Waldencast receives, after completion of the transactions contemplated by the Obagi Merger Agreement, an amount of cash equal to or exceeding $50,000,000 and the Obagi Cash Consideration equaling or exceeding $327,500,000, subject to reduction for Obagi’s expense overage.
  • Milk:
    • Conditions to the Milk Members’ obligation to consummate the Milk Transaction includes, among others, that Waldencast receive, after completion of the transactions contemplated by the Milk Equity Purchase Agreement, an amount of cash equal to or exceeding $50,000,000 and the Milk Cash Consideration is equal to or greater than $112,500,00.00.

NOTABLE CONDITIONS TO TERMINATION

  • The Obagi and Milk Merger Agreement may be terminated at any time prior to the Obagi Closing in the event of certain uncured breaches by the other party or if the Obagi Closing has not occurred on or before August 15, 2022 (the “Agreement End Date”).

ADVISORS

  • J.P. Morgan Securities LLC acted as capital markets advisor and lead financial advisor, and Credit Suisse acted as capital markets advisor and financial advisor to Waldencast.
  • Skadden, Arps, Slate, Meagher & Flom LLP acted as legal advisor to Waldencast.
  • Lazard was financial advisor to Obagi, and Financo Raymond James was financial advisor to Milk Makeup.
  • Latham & Watkins served as legal counsel to Obagi, and Goodwin Procter served as legal counsel to Milk Makeup.

MANAGEMENT & BOARD

Executive Officers

Michel Brousset, 48
Chief Executive Officer and Director

Mr. Brousset is currently the Chief Executive Officer of Waldencast Ventures, a holding company and investment vehicle that he founded in March 2019 to focus on Seed and Series A stage companies in the beauty, personal care and wellness sectors. Mr. Brousset has led investments in all Waldencast Ventures portfolio companies including Kjaer Weis, Costa Brazil, Manuel.co, Sallve, c16 Biosciences, and a pre-launch skincare brand. Prior to founding Waldencast Ventures, Mr. Brousset was the Group President of L’Oréal’s Consumer Products Division in North America from July 2016 to April 2019. Previously, Mr. Brousset was the CEO and Managing Director of L’Oréal UK&I between July 2013 and July 2016. Mr. Brousset began his career at L’Oréal as CEO and Country Managing Director of L’Oréal Peru in April 2012. In addition to his extensive operating and leadership experience at L’Oréal, Mr. Brousset has also spent nearly 14 years at Procter & Gamble between June 1998 and April 2012 in various marketing and brand management roles across North America and Western Europe. Mr. Brousset currently serves as Chairman of Kjaer Weis and Board Director for several Waldencast Ventures portfolio companies. Mr. Brousset hold a B.S. in Economics from the Universidad del Pacífico and an M.B.A. from the University of North Carolina Kenan-Flagler Business School.

Hind Sebti, 42
Chief Operating Officer

Ms. Sebti has more than 20 years of experience leading and managing beauty brands across multiple categories and stages during her tenures at L’Oréal (PAR: OR) and Procter & Gamble (NYSE: PG). Ms. Sebti co-founded Waldencast Ventures alongside Mr. Brousset in 2019. Since January 2020, Ms. Sebti has also served as Chief Executive Officer of Waldencast Brands, a subsidiary of Waldencast Ventures, to incubate and commercialize new beauty and wellness brands. Prior to Waldencast Ventures, Ms. Sebti held various leadership positions at L’Oréal from April 2013 to December 2018. She was the General Manager for Maybelline and Essie in the United Kingdom from July 2017 to December 2018. She held the position of General Manager of professional haircare brands Redken, Pureology and Mizani from September 2015 to July 2017. Ms. Sebti her tenure at L’Oréal as the Marketing Director of L’Oréal Paris and Consumer Division Category Director. Prior to L’Oreal, Ms. Sebti held various Business Leader and Brand Manager positions at Procter & Gamble in the U.K., Ireland and France across brands such as Olay Skin Care and Gillette Venus from January 2002 to March 2013. Ms. Sebti serves as a Board Member of Cosmetic Executive Women U.K. and holds a Masters Degree in Industrial Engineering from The National Institute of Applied Science of Lyon.

Board of Directors

Felipe Dutra, 55
Executive Chairman of the board of directors

Mr. Dutra served as the Chief Financial Officer at Anheuser-Busch InBev (Euronext: ABI) (NYSE: BUD) (MEXBOL: ANB) (JSE: ANH) from January 2005 to April 2020. Mr. Dutra’s contributions to AmBev, AB InBev’s current subsidiary, stretch back to 1990. He held multiple leadership positions in Treasury and Finance at AmBev before being appointed to Chief Financial Officer in 2000. As CFO of AmBev, Mr. Dutra led and executed multiple transformational transactions including the merger with Interbrew in 2004, acquisition of Anheuser-Busch in 2008, acquisition of Grupo Modelo in 2012 and acquisition of SABMiller in 2016. In addition to transformational acquisitions, Mr. Dutra has also led numerous buyouts of smaller breweries to build AB InBev’s craft portfolio as well as executed a series of acquisitions in China to build AB InBev into a leading brewer in the region. In 2019, Mr. Dutra oversaw the initial public offering of Budweiser APAC (HKG: 1876) on the Hong Kong Stock Exchange. In 2014, Mr. Dutra took on the additional role of Chief Technology Officer to lead the company’s adoption of digital technology and implementation of data analytics. Mr. Dutra started his career at Aracruz Celulose, a Brazilian manufacturer of pulp and paper products. Mr. Dutra has been a Board Director of AmBev (BOVESPA: ABEV) (NYSE: ABEV) since January 2005 and served as a Board Director of Grupo Modelo from December 2010 to June 2013 and Budweiser APAC from September 2019 to June 2020. He holds a degree in Economics from Universidade Candido Mendes and an M.B.A. from Universidade de São Paulo in Brazil.

Cristiano Souza, 46
Director

Mr. Souza is a senior partner at DCL. Based out of the United Kingdom, DCL is the investment advisor of the Dynamo Fund, an investment fund focused on long-term equity investments. Mr. Souza is also a partner at DAR, a Brazilian investment manager established in 1993 focused on long-term equity investments in Brazil. Mr. Souza joined DAR in 1994 and was involved in its investing activities until 2014 when he relocated to the United Kingdom to focus on the investment advisory of Dynamo Fund. Mr. Souza has a Bachelor degree in Economics from Candido Mendes University in Rio de Janeiro.

Sarah Brown, 57
Director

Ms. Brown’s work brings together the worlds of business, philanthropy, non-profit activism, and youth campaigning. She is the Chair of Theirworld, a global children’s charity dedicated to ending the global education crisis. She also serves as the Executive Chair of the Global Business Coalition for Education. She is CEO of the Office of Gordon and Sarah Brown established in 2010 after Gordon Brown’s premiership ended in the U.K. Ms. Brown also serves as a Non-Executive Director of Harrods Group Holdings Ltd. She holds a Bachelor’s of Science degree in Psychology from the University of Bristol. Ms. Brown was awarded fellowship from the Royal College of Obstetricians and Gynecologists and of the Royal College of Pediatrics and Child Health. She is the author of Behind the Black Door, a personal memoir.

Juliette Hickman, 46
Director

Ms. Hickman is a former investment analyst and investor at Capital World Investors, part of The Capital Group Companies. She joined The Capital Group in 1998 and held the role of investment analyst and investor initially focusing on the Global Beverage industry until 2020. Ms. Hickman has served as an independent director for Montanya Distillers since 2019 and an independent director for Keurig Dr. Pepper since January 2021. Ms. Hickman holds a Bachelor’s of Arts degree in Politics and Public Administration from the Nottingham Trent University.

Lindsay Pattison, 47
Director

Ms. Pattison has years of experience in the fields of marketing, advertising and business-transformation. She was appointed in 2018 as the global Chief Client Officer at WPP PLC, a leading marketing services organization. Previously, Ms. Pattison was GroupM’s, and then WPP’s, Chief Transformation Officer. She was previously Global CEO of Maxus, a WPP media agency. Her experience also includes roles at Young and Rubicam and PHD Media, as well as a client-side role with Sony Ericsson. She serves on the board of directors at the communications company Chime Ltd and at the international design agency Design Bridge. She served twice on the WEF Global Agenda Council on the Future of Media. As a passionate and vocal campaigner for gender equality, she launched ‘Walk the Talk’, an initiative to help senior women at Maxus to thrive and make progress in their careers — a program now adopted globally by WPP. She sits on WPP’s Inclusion Council and Risk Committee. Ms. Pattison holds a Bachelor’s of Arts in English Literature from the University of Stirling and completed the TLC Leaders Program, a leadership course delivered by members of the faculty of Harvard Business School.

Zack Werner, 32
Director

Mr. Werner is the founder of The Maze Group, a highly technical strategic consultancy focused on data architecture and driving growth through digital marketing. Mr. Werner began his career at Universal Music Group, where he focused on digital distribution deals, customer relationship management and integrated marketing systems. In 2016, Mr. Werner founded The Maze Group. Maze partners with private equity owned and public clients such as LVMH, HelloFresh, JC Penney, General Electric, and Pat McGrath Labs to optimize customer acquisition, conversion rate, and retention as well as provide strategies around technology platform and infrastructure transformation. The Maze Group also partners with private equity clients to co-invest in consumer companies. In addition, in 2017, Mr. Werner became an advisor for Stadium Goods, a sneaker and streetwear marketplace, to oversee eCommerce and growth.

 

ByKristi Marvin