By Anuja Bharat Mistry

(Reuters) - Model Hailey Bieber's makeup and skincare brand, Rhode, is being snapped up by Elf Beauty ( ELF ) for about $1 billion, giving the budget cosmetic retailer access to a celebrity-endorsed product line that has become hugely popular among Gen Z and millennials.

Elf said on Wednesday it would pay Rhode shareholders $800 million in a combination of cash and stock and an additional potential earnout consideration of $200 million subject to certain performance-related conditions.

Last month, Reuters reported that Bieber was exploring a sale of the brand, which could be worth more than $1 billion.

For Elf, the deal would mark a shift in strategy and expand into the prestige beauty market as the company faces weak demand from mass market customers who are being pressured by persistent high inflation.

Elf - short for eyes, lips and face - offers products priced as low as $2 at U.S. retailers including Walmart ( WMT ), Ulta Beauty ( ULTA ) and Target ( TGT ).

On the other hand, Rhode - which launched in 2022 and gained popularity with TikTok viral products such as its $18 "peptide lip treatments" - sells exclusively through its own website or pop-up stores, relying heavily on Hailey Bieber's social media influence.

"e.l.f. Beauty marks an incredible opportunity to elevate and accelerate our ability to reach more of our community with even more innovative products and widen our distribution globally," Bieber said.

The company raked in about $212 million in sales for the year ended March 31 and is planning to start selling at Sephora stores across the U.S. and Canada coming this fall, followed by the UK.

"Rhode further diversifies our portfolio with a fast-growing brand that makes the best of prestige accessible," Elf CEO Tarang Amin said in a statement.

Earlier this year, Elf's shares cratered 20% after the company cut its annual forecasts and warned of weakening demand.

Elf's deal with Rhode would mark its biggest acquisition to date and follows its $355 million acquisition of skincare company Natrium in 2023.

Bieber will continue her role as founder and will also act as a "strategic advisor" after the deal closes. The transaction is expected to close in the second quarter of fiscal 2026.

Separately, Elf on Wednesday refrained from providing a fiscal 2026 forecast due to uncertainty surrounding import tariffs despite beating Wall Street expectations for fourth-quarter sales.

The company, which sources about 75% of its products from China, down from 100% back in 2019, said last week it would raise prices by $1 to combat tariff pressure.