Alibaba-backed beauty tech firm Perfect Corporation to merge with US blank-cheque company in deal worth US$1 billion

Perfect is known for ‘YouCam’ app that allows users to try on make-up and hair dye virtually
As part of the deal, Perfect will receive US$50 million from strategic investors such as Chanel, Shiseido and US camera company Snap, among others

Banking & finance

Georgina Lee

Published: 7:45pm, 3 Mar 2022

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Perfect Corporation, a Taiwanese augmented reality (AR) software services provider focusing on beauty and cosmetic brands, has signed an agreement to merge with Nasdaq-listed blank-cheque company Provident Acquisition Corporation in a deal that values it at US$1.02 billion.

The start-up, which counts Alibaba Group Holding and Goldman Sachs Asset Management as early investors, will raise up to US$335 million through the merger with the special purpose acquisition company (SPAC), according to a statement.

“By combining with Provident Acquisition, we expect to … increase development in artificial intelligence (AI) and AR technology”, such as applying its technologies to the metaverse, it said. The metaverse is the new frontier for the internet and features a three-dimensional, immersive online world.

Perfect is known for “YouCam”, its selfie editor app, which allows users to try on make-up and hair dye virtually. The app helps cosmetic brands widen their reach to customers. The company, founded in 2015, said the app, which also helps users detect wrinkles in advance, has been downloaded more than 1 billion times.

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Part of the proceeds that Perfect will receive include US$50 million from several strategic investors such as Chanel, Shiseido and US camera company Snap, among others.

The SPAC raised US$230 million in an IPO in January. SPACs are shell companies created to raise financial war chests through share sales, and must use the proceeds to buy assets within a limited period of time.

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The deal, subject to shareholders’ approval and other regulatory clearances, is expected to close in the third quarter of this year. If successful, it will see Perfect list on Nasdaq under the ticker “PERF”.

Perfect uses AI and AR to help cosmetic brands create more accurate product matching by creating a 3D face for users. It uses machine learning and facial recognition in an emerging sector known as beauty tech. It currently has 44 patents that have either been granted or are pending, and claims that its enterprise solutions are used by more than 400 beauty brands in over 80 countries.

Perfect also has tie-ups with leading e-commerce platforms, such as Alibaba’s Taobao and Snap’s Snapchat, enabling cosmetic and beauty brands to use its AR solutions to expand and engage online shoppers.

Before its merger with Provident Acquisition, Perfect said it had raised a total of US$130 million over four rounds of financing. The last two rounds were led by Goldman Sachs Asset Management in January 2021, and by Alibaba in September 2019, data from Crunchbase shows.

“We’ve come close to breaking even for the past three years,” a spokesperson said, adding that the company saw continued growth and profitability next year.

“Current consumer trends, such as hygiene awareness and focus on environmental, social and governance (ESG) [issues], provide us with favourable tailwinds to accelerate growth and adoption of our services,” Alice Chang, Perfect’s founder and CEO, said in the statement.

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Provident Acquisition is led by Winato Kartono, the founder of Southeast Asia-focused private-equity firm Provident Growth, which is based in Hong Kong. He was formerly the head of investment banking in Indonesia for Citigroup.

Provident Growth’s founding partner Michael Aw was formerly the head of media and telecoms at UBS’s investment banking division in Asia. The firm’s portfolio includes unicorns such as fashion brand Pomelo, online travel agency Traveloka and blockchain gaming giant Animoca Brands.

Goldman Sachs is the financial adviser to Perfect. Citi and Barclays Capital are co-placement agents of the deal, with the latter also serving as the merger and acquisitions adviser to Provident Acquisition. The companies will discuss the deal with the SPAC’s investors later on Thursday.

Alibaba owns the South China Morning Post.

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