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eCommerce - Tuesday, December 29, 2009

Drugstore.com Salvages Beauty's Salu with $36M Buyout

Drugstore.com is buying beauty site Salu, which runs SkinStore.com, among other sites. Drugstore will pay $36M (50/50 cash and stock). The deal is a bitter pill to swallow for Salu investors who have put in $40M going back to 1999. Investors include Atlas Venture, El Dorado Ventures and Lumira Capital.

Sacramento-based Salu is expected to generate at least $40M in revenue and $500,000 in net income this year. Salu is run by CEO JIm Steeb who amazingly has been there for nearly the full ride since 1999.

VCs were hot on vertical eCommerce sites like Salu given success stories like Zappos and Diapers.com. Salu is more of a cautionary tale. Even though Salu's revenues are strong they have to be extraordinary like Zappos for buyers to really compensate investors.

Founded in 1997, Salu carries more than 200 brands of skin-care and beauty products, often found only in spas, high-end stores and dermatology offices. SkinStore.com also has an aesthetician-staffed call center.

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