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Estée Lauder points to minority investments as it talks M&A for 2018

The Estée Lauder Cos. Inc. may be looking at some small cosmetics companies in which it already has investments as it considers its M&A strategy for 2018.

President, CEO and Director Fabrizio Freda signaled that the company might be eyeing changes to its relationships with smaller cosmetics companies, during a call with analysts Feb. 2.

"We have also minority investments that may become available in the next years, which were already part of our articulated portfolio strategy," Freda told analysts.

Executive Vice President and CFO Tracey Travis said the company feels "very good about the portfolio" of brands it currently has, responding to a question from an analyst about whether the New York-based company plans to either add new assets to its portfolio or divest existing ones from it.

Travis indicated that the company remains open to striking deals, including acquisitions.

"We have identified some white space areas that if the right assets become available ... [we] would certainly entertain those acquisitions if they have the right return on invested capital," she said.

The company also had about $3.4 billion in cash and "liquid investments" outside the U.S. at the end of December 2017, a stockpile that "could provide additional financial agility" for the cosmetics maker as it repatriates the money under the new tax law, Travis told analysts.

While Estée Lauder booked $394 million in one-time charges as a result of tax reform enacted by President Donald Trump in December 2017, Travis said the company expects its global effective tax rate to fall to 24% for its 2018 fiscal year, down from the 26% she projected for analysts during the company's first-quarter earnings call in November 2017.

The maker of beauty products under brands including Jo Malone and Clinique has stakes in multiple companies. In June 2017, Estée Lauder invested an undisclosed amount in Toronto-based DECIEM Inc., which sells products including anti-aging creams and hair conditioners, often at a steep discount to rivals.

The company also has minority investments in at least two brands in Asia, according to S&P Capital IQ. The company claimed a stake in South Korea-based HAVE & BE CO. Ltd., which makes cosmetics including face creams, in October 2015.

In India, Estée Lauder has had an investment in Mountain Valley Springs India Private Ltd. since June 2008. The New Delhi-based company manufacturers massage oils, bath crystals and hair care items.

Estée Lauder has not disclosed the value of its investment in either company.