L’Oréal has asked for the price it paid to acquire hair care brand Color Wow to be kept secret in a US court case.
Color Wow and its parent company Federici Brands were purchased by L’Oréal last year for an undisclosed sum.
Shelley Waln, an executive at Color Wow, is allegedly suing Federici Brands.
Waln claimed that she is owed more than the US$1.2m she was offered based on a $30m valuation of the company in 2020, according to court documents filed in Connecticut.
Within the documents, Waln alleged the deal was worth around $1bn and that she is owed 4% of the sales proceeds.
In an affidavit filed on March 24, L’Oréal USA’s Senior VP of Business Development, Sanjay Devi, stated that the sale price is considered “an important trade secret” and that it ”protects this information accordingly”.
Disclosing the price in court papers “would cause direct and immediate commercial and competitive harm to L'Oréal”, he stated.
The sale price of Color Wow is ”highly sensitive commercial information that would disclose L'Oréal proprietary business information to other potential sellers and to competitors of L'Oréal, who could use the information to L'Oréal’s disadvantage”, continued Devi.
Disclosing the sale price could push up the value of future acquisitions, as companies potentially selling to L’Oréal could use the information to set a sale price.
This could make such acquisitions harder for L’Oréal to negotiate in future and impact revenue growth, according to the affidavit.
A disclosure of the sale price would also put L’Oréal on an “uneven playing field” with competitors, the affidavit said.
“L'Oréal does not typically know what its competitors pay to acquire privately held companies, and those competitors likewise do not know what L'Oréal pays to acquire privately held companies,” Devi stated.
“If the Federici net sales price became public, the disclosure would place L'Oréal on an uneven playing field relative to its competitors.
“It would disclose L'Oréal's acquisition strategy beyond what it, or any competitor, is required to disclose.”
Cosmetics Business has contacted Color Wow, Federici Brands, and L'Oréal for comment.