Drugstore.com shells out $42 million for Beauty.com

Online pharmacy Drugstore.com today said it has agreed to acquire Beauty.com in a stock deal worth $42 million.

The acquisition will provide Drugstore.com access to the $6.2 billion beauty market, the Bellevue, Wash.-based company said in a statement.

Under terms of the deal, Drugstore.com said it will buy New York-based Beauty.com for approximately $1.3 million shares of its stock. Based on Drugstore.com's closing price of $32.38 yesterday, the deal is valued at around $42 million.

Analysts at Cambridge, Mass.-based Forrester Research project that the online health and beauty products industry, which includes cosmetics, will grow from $509 million in 1999 to $10.4 billion in 2004--or 5 percent of the total sales in the industry. As reported, about 24.8 percent of women online also shop on the Web. Analysts have said that as more Web sites focus on content for female audiences, more women will shop via the Internet.

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Under the deal, Beauty.com, which sells high-end cosmetics and fragrance brands, will be operated as a sister store to Drugstore.com, the company said. Privately held Beauty.com will remain its own separate brand, keep its URL and continue to create its own merchandising, marketing and editorial content from its current headquarters. In turn, Drugstore.com will provide the technology and order-related customer service for Beauty.com.

The companies said they expect to close the deal in the first quarter of this year, and added that the deal is subject to certain regulatory closing conditions.