L'Oreal chairman and CEO Jean-Paul Agon
L\'Oreal chairman and CEO Jean-Paul Agon poses for a portrait after a news conference in Shanghai (Reuters)

French cosmetics giant L'Oreal has offered to acquire Chinese skincare firm Magic Holdings as it looks to expand its presence in the fast-growing Chinese skincare market.

L'Oreal will pay HK$6.54bn ($843m, £539m, €635m), or HK$6.30 per share in cash for Magic Holdings, the companies said in a joint statement. The offer price represents a 25% premium to Magic Holdings' last trade price on Hong Kong Stock Exchange.

Following the news, Magic Holdings shares rose as much as 21% in the Hong Kong market.

L'Oréal has the support of Magic board of directors and six key Magic shareholders representing 62.3% of the company's stake, said the statement.

The transaction is still subject to the approval by the Ministry of Commerce of the People's Republic of China (Mofcom).

L'Oreal and China

L'Oreal, the world's largest cosmetics group that makes Garnier shampoo and Yves Saint Laurent perfume, has operated in China since 1997. The country is the third largest cosmestics market in the world, with an estimated value of $15bn.

China's cosmetics market is projected to grow 63% from 2010 to the end 2015, according to consumer research firm Euromonitor.

L'Oreal, which generated sales of €22.5bn in 2012, looks to capitalise on the growth prospect in China with the acquisition of Magic. The acquisition is in line with L'Oreal's plan to counteract stagnant growth in the traditional Western markets with high growth regions, such as Asia, Latin America, the Middle East and Africa.

Magic is a specialist in cosmetic facial masks, a fastest growing area in China's beauty market. Magic's MG brand is one of China's leading products in this category, according to L'Oreal.

In 2012, Magic generated revenues of about €150m, up 29% from the previous year.

"Relying on Magic's highly talented management and teams, L'Oréal intends to develop this Chinese brand by contributing its science based expertise, and using its advanced and applied research in its China Research & Innovation centre and across the world," L'Oréal said in a statement.

"The MG brand will deliver benefits to Chinese consumers by beautifully complementing L'Oréal's Consumer Products Division existing portfolio of brands in China."

L'Oréal employs 3 500 people in China and it runs a research and innovation centre in Shanghai and two plants in Suzhou and Yichang.