Road funding

Morphe owner Forma Brands says it is considering options including bankruptcy – WWD

Forma Brands, the parent company of Jaclyn Hill’s Morphe, Lipstick Queen and Jaclyn Cosmetics, is considering filing for Chapter 11 bankruptcy, sources have confirmed.

People familiar with the process told WWD that such a move was under consideration, but stressed that nothing was certain and that other options were on the table, including out-of-court settlements with the creditors.

A Forma spokesperson said, “Forma Brands is engaged in constructive discussions with our financial stakeholders regarding ways to financially strengthen the business and enable us to increase our focus on the opportunities we see for our brands. We are excited about the products we will continue to bring to our customers. »

The majority owner, private equity firm General Atlantic, declined to comment. The news was first reported by Reorg Research.

General Atlantic acquired a 60% stake in Morphe in 2019, which at the time was a popular brand run by brother and sister Chris and Linda Tawil that grew largely through partnerships with influencers. The deal valued the company at $2.2 billion.

The Tawils had already grown Morphe from a brand of trade show makeup brushes to a full-fledged operation by aligning themselves with early makeup influencers such as Jeffree Star and James Charles.

When General Atlantic became involved, the business was at a high and profitable level – at the time of its investment, Morphe was reported to have had approximately $500 million in net sales, with approximately $130 million in earnings before interest, taxes, depreciation and amortization.

But then several factors happened that weighed on Morphe’s performance. First, COVID-19 hit, driving color cosmetics sales down across the industry. Then Morphe cut ties with Star and Charles amid allegations of inappropriate behavior. Additionally, supply chain issues have plagued the company.

Forma, the parent company, was established in 2020 as part of the company’s diversification efforts. The company also launched a sub-brand, Morphe 2, and made several acquisitions, including Lipstick Queen and Playa, and incubated brands, including Bad Habit. In March, former Too Faced executive Eric Hohl joined Forma as chief executive, succeeding Myles McCormick, who led the company through its era of growth. Hohl was president of Too Faced when General Atlantic sold it to Estée Lauder Cos. for $1.45 billion in 2016.

In 2021, Forma landed at number 80 on Beauty Inc’s Top 100 list, with an estimated revenue of $350 million.