A $1.2 billion deal intended to create a global beauty empire has narrowed into an effort to revive a single struggling makeup brand after Milk Makeup reported sharply lower sales.

In early 2021, Michel Brousset, the former group president of L’Oréal’s Consumer Products Division in North America, and fellow beauty executive Hind Sebti launched Waldencast Acquisition Corp., a special purpose acquisition company that went public during the height of the SPAC boom. SPACs go public first to raise capital, then merge with a private target, which becomes publicly traded through the combination.

In November 2021, Waldencast announced a $1.2 billion three-way business combination involving Obagi Medical, a physician-dispensed skincare brand, and cult beauty label Milk Makeup. The company described the transaction as the “first step” in building a global multibrand beauty and wellness platform. The deal closed in July 2022.

Four years later, that platform has unraveled within months. In June, Waldencast agreed to sell Obagi Medical to private equity firm Bridgepoint. The transaction closed July 30 for up to $460 million, including vendor notes and as much as $64 million in earnout payments tied to Obagi’s future performance. Waldencast had valued Obagi at $858 million on an enterprise-value basis when it entered the original deal in 2021, according to its SEC filing. The company had separately sold Obagi’s rights in Japan to Rohto Pharmaceutical for $82.5 million in late 2025.

Three of Waldencast’s most senior executives moved to Obagi. Brousset, Sebti, and CFO Manuel Manfredi left Waldencast to lead Obagi alongside Bridgepoint. Executive chairman Felipe Dutra now serves as Waldencast’s principal executive and financial officer, leaving the company focused entirely on Milk Makeup.

At major retailers such as Sephora and Ulta, Milk Makeup may still appear to be operating normally. Its products remain on store shelves, and securing distribution at Sephora continues to carry prestige. The company’s financial results, however, present a far less reassuring picture.

Milk Makeup’s net revenue fell 57.1% to $26.1 million in the first half of 2026, from $60.9 million a year earlier, according to Waldencast’s first-half results, published Sept. 28. Waldencast said the year-earlier period included roughly $10 million in pipeline shipments that did not recur in 2026. Milk also swung to an adjusted EBITDA loss of $14.8 million, compared with a profit of $9.7 million a year earlier. Waldencast said the first-half results “largely reflect decisions and actions taken in 2025.”

Four days before releasing the results, Waldencast filed a Form 25 to voluntarily delist from Nasdaq. A Form 25 is the filing a company uses to remove its securities from an exchange and deregister them under the Exchange Act. Its last trading day was expected to be on or about Oct. 2. The company plans to seek quotation on an over-the-counter market, where shares trade outside a formal exchange, under the ticker “MLKM.” Waldencast estimates that the move could eliminate 80% to 90% of its $18.5 million in annual central headquarters costs.

Tim Coolican, who was CEO of Milk Makeup when the Waldencast deal was struck and remained in the role in early 2025, has since left the company. Waldencast’s public filings do not specify when or why he departed. By February, Coolican had joined Blackstone as an operating executive focused on consumer businesses. A Waldencast spokesperson told Fortune that the company could not comment on former employees’ departures.

Accounting shows how Milk’s prospects have declined

Waldencast’s accounting provides another indication of how much expectations for Milk Makeup have fallen. In its first-half results, the company recorded a $52.3 million noncash goodwill impairment charge related to Milk, following a $20 million impairment a year earlier. Goodwill generally represents the amount a buyer pays for a business above the value of its identifiable assets.

The latest write-down reduced Milk-related goodwill on Waldencast’s balance sheet from $115.1 million to $62.8 million. As part of its impairment test, Waldencast estimated the fair value of the Milk Makeup reporting unit using a model weighted 80% toward discounted cash flow analysis and 20% toward comparisons with publicly traded companies.

Waldencast did not disclose the resulting fair value directly, but it provided enough information to calculate an approximate base estimate. The company said that if Milk’s projected adjusted EBITDA were 5% lower in each year of its forecast, the estimated fair value would decline by $74.7 million, or 41.6%. Dividing $74.7 million by 41.6% produces a base estimate of roughly $180 million.

That figure does not mean Milk could be sold for $180 million today. It is an accounting estimate based on Waldencast forecasts and assumptions, rather than a price offered by a buyer. It is also not directly comparable with the $382 million enterprise value Waldencast assigned to Milk in the original 2021 transaction. Goodwill is only one component of Milk’s book value. As of June 30, Waldencast’s balance sheet also included $95.8 million in intangible assets, along with inventory and other assets.

Still, the impairment and the approximately $180 million implied fair value indicate how far Waldencast’s expectations for Milk have fallen.

Waldencast identifies four problems at Milk

Waldencast has identified four main factors behind Milk’s deterioration:

• Distribution expanded faster than the company could support with field education and marketing.
• Some 2025 product launches failed to attract enough new consumers or generate sufficient incremental demand.
• The quality and value of the previous generation of Sticks products fell short of consumer expectations.
• The absence of an early-summer launch in 2026 left the brand without new products during one of the category’s busiest periods. A year earlier, Milk had launched four products during the same period.

The company is now returning to Milk’s origins. Cofounder Mazdack Rassi was named president in November 2025 as part of a restructuring. In its Sept. 28 shareholder letter, Waldencast said Rassi and fellow cofounder Zanna Roberts Rassi are “now back at the center” of the brand’s creative direction, product vision, and cultural relevance.

Restoring brand relevance is the first of five priorities in Waldencast’s strategy to return Milk to growth. The company said its Hydro franchise now represents about half of the business and is growing 69% year over year. It relaunched the Sticks line in August and spent about $4 million during the third quarter installing redesigned displays in U.S. Sephora stores.

Waldencast’s stated “North Star” is to double Milk’s 2025 revenue over the next five years, although the company emphasized that the target is not financial guidance. Subject to shareholder approval, Waldencast also plans to rename itself Milk Makeup plc because Milk is its only remaining brand.

The company still has cash available. When the Obagi sale closed, Waldencast repaid $178.4 million of debt, including a $27 million prepayment premium, and received $149.9 million in net cash proceeds. As of Aug. 31, it had $138.6 million in cash after fully repaying its senior term loan. The board is continuing to review how to allocate the remaining proceeds.

Waldencast therefore has $138.6 million in cash, Milk’s founders back at the center of the brand, and no other operating brand to rely on.