Forma Brands, the parent company of make-up brand Morphe, has filed for bankruptcy and accepted an acquisition deal.
The company has started the initiation of voluntary Chapter 11 proceedings in the US Bankruptcy Court for the District of Delaware.
The firm’s assets will be acquired by lenders, including Jefferies and Cerberus Capital Management.
The company will receive US$33m in financing from that group, subject to court approval.
The secured creditors will take over Forma Brand’s online platforms, wholesale operations and international Morphe retail stores
This news comes a week after Morphe announced on Twitter it is closing all its US stores with immediate effect.
According to court documents, Forma Brands has between $500m-$1bn in liabilities.
The beauty incubator said its current product development initiatives, brand launch plans and marketing collaborations will still go ahead.
Beauty brands within Forma Brands portfolio include YouTube star Emma Chamberlain’s Bad Habit and fashion stylist Shelby Wild’s Playa Beauty.
YouTuber Jaclyn Hill’s eponymous brand and Morphe’s Gen Z skin care line, Morphe 2, are also produced by the brand owner.
Singer Ariana Grande's line R.E.M. Beauty will not be part of the deal.
According to court documents, Forma Brands is citied as planning to end the licensing deal.
“Over the last year, Forma Brands has been implementing initiatives to stabilise our business and reposition our organisation for long term growth,” said Simon Cowell, President of Forma Brands, in a company statement.
“This agreement is a testament to the strength of our brands most meaningful to our consumers, including Morphe and Morphe 2.
“We will have additional financial resources available to invest in our multi-category portfolio, product launches, and innovative brand and marketing strategy.
“As we advance our vision to inspire creativity, promote inclusivity and connect with consumers around the world through beauty."
YouTube star Emma Chamberlain’s Bad Habit skin care line is in Forma Brands beauty portfolio
What has been happening at Forma Brands?
It has been a rocky four months for the beauty giant, with rumours about closures and bankruptcy lingering for some time.
In December 2022, several Morphe employees took to TikTok to criticise the brand and its parent company for silently closing stores without notice.
Staff claimed they were awaiting last-minute closures because their stores were empty and had no stock to line shelves.
The hashtag #justiceformorpheretailemployees started trending on TikTok, gaining 1.1 million views.
In January 2023, Morphe announced on Twitter the closure of all its US stores effective immediately.
Forma Brands said this was part of the company’s new strategic plans to focus on its wholesale and e-commerce operations.
Morphe’s revenue for 2021 was $295m, which was down from around $500m cited in media reports in 2019.
Rumours were also rife that Forma Brands was considering filing for Chapter 11 bankruptcy back in October 2022.
Credit intelligence agency Reorg Research reported that Forma Brands had around $600m-$700m worth of debt, but nothing was filed by the company.