MILAN, Jan 4 (Reuters) - Beauty manufacturer and retailer L'Occitane Group has bought luxury home fragrance brand Dr. Vranjes Firenze from Bluegem, the European private equity firm said on Thursday.

The deal values Dr. Vranjes at around 150 million euros ($164 million), according to a person with knowledge of the matter, or nearly 12 times its core profit.

Bluegem acquired the majority of Dr. Vranjes in 2017 and presided over its international expansion, especially in Asia and the Middle East, while also lifting its online sales to more than a quarter of total group sales.

Bluegem said the business had more than tripled its sales since it took control, with revenue topping 42 million euros last year and a core profit margin of more than 30%.

Dr. Vranjes Firenze currently commands 13% of the 536 million euro high-end home diffuser market, second only to Dutch beauty chain Rituals, it added.

The company was founded by Paolo Vranjes in 1983 in Florence, a city with a long tradition of perfume making which blossomed during the Renaissance, when the town's wealthy merchants started wearing costly fragrances to mark their status.

With 28 monobrand stores and 650 points of sale, Dr. Vranjes distributes across 75 countries its products, mainly diffusers of home fragrances such as Rosso Nobile, which is inspired by Tuscany's famed red wines and retails at 98 euros for half a litre.

While Bluegem introduced new product lines such as personal fragrances and scented candles, home fragrances still account for 90% of total sales.

Bluegem, which targets businesses with stable consumer demand and "premium yet affordable" products, has nearly tripled the number of Dr. Vranjes's employees, of which a majority are women, in line with social responsibility goals that include also preserving a local supply chain.

The deal is expected to close at the end of the first quarter.

Rothschild & Co, BPER, Deloitte, New Deal Advisors and law firms Latham & Watkins, Studio Galgano, DLA Piper, Gattai Minoli worked with the sellers.

The buyer was advised by Legance, Skadden and Lempriere Wells.

($1 = 0.9128 euros) (Reporting by Elisa Anzolin; Editing by Valentina Za and Susan Fenton)