Hailey Bieber’s beauty and skincare company, Rhode, has been acquired by e.l.f. Beauty in a blockbuster deal worth approximately $1 billion. e.l.f. announced on Wednesday, May 28, that it would pay Rhode’s shareholders $800 million in cash and stock and another $200 million in an earn-out that is contingent on performance over three years.
New York Post reports that Sky Canaves, a researcher at eMarketer, described it as ‘a bold move for e.l.f. into premium beauty at a time when the prestige side of the business has lost some of its momentum due to consumers purchasing less or trading down’.
Finance specialist Mahalakshmi C went on Instagram to analyze the thinking behind this purchase. Her background includes an MBA from Dartmouth’s Tuck School of Business, and her bio lists venture capital experience, calling it ‘kinda like Shark Tank’.
Mahalakshmi clarified in her post, “Celebrity brand purchases are typically structured like this: the celebrity remains a part of the company for a couple of years. Everyone is aware of the fact that the celebrities and their own brands are responsible for developing these companies. Preferably, the buying company will find ways to develop the brand in spite of the celebrity in the next couple of years. Meanwhile, the company is motivated to continue with good performance with a payment down the line. This is an earn-out. For Rhode, it was purchased for $1bn, but $200mn will be received only if the company achieves certain targets within the next 3 years.”
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Mahalakshmi summarized three key reasons for the deal:
1. Diversification Beyond China
Calling it a ‘Not-Just-China strategy’, Mahalakshmi pointed out that around 75% of e.l.f.’s existing product manufacturing is in China exposing it to a significant 55% tariff. Rhode, on the other hand, sources its ingredients from the U.S., Europe, and other regions in Asia. This provides e.l.f. with a more diversified and less tariff-exposed supply chain.
2. Foray into Premium Beauty and Prestige Retail
Another major reason is e.l.f.’s foray into the premium segment. Mahalakshmi explained that although e.l.f.’s lip stain costs $6, Rhode’s lip tint costs $18. “Rhode to debut in Sephora US and Canada in fall 2025. E.l.f retails in Target, Ulta, Walmart, CVS, etc.” She further added, “E.l.f will receive access to a new consumer base altogether. It’s acquiring a passport into the premium aisle without rebranding.”
3. Ongoing Role for Hailey Bieber
The agreement also highlights the continued participation of Hailey in the company. Mahalakshmi stated, “Hailey to remain strategic advisor and chief innovation officer,” to establish that e.l.f. recognizes her contribution to Rhode’s brand value and consumer marketability. She continued, “Rhode will get $800 million upfront ($600m cash + $200m e.l.f shares) and $200m if the company does well for the next 3 years.” She noted that e.l.f. “will still leverage Hailey’s brand to expand the business.”
Overall, the deal provides e.l.f. with the opportunity to diversify away from China, access a higher-end beauty category, and ride Hailey Bieber’s celebrity cred—while trying to make Rhode more independent.
