Jafra’s Beauty Is Too Deep In Mexico for Most Buyers By SHELLY GARCIA Senior Reporter After months on the block, Jafra Cosmetics International Inc. has yet to find a buyer. The Westlake Village-based company that markets through a multi-tiered system similar to Avon Products Inc. and Mary Kay Inc. is sound; its sales have been growing; and, on its face at least, the company seems to have considerable room for expansion. But Jafra is caught in a kind of economic crossfire. Investors with capital to spend are anxious for acquisition opportunities, but they are insisting on some assurance of future stability that Jafra, with about 70 percent of its revenue generated in Mexico, just cannot offer. “Mexico has seen higher than expected inflation and the level of the peso remains precarious,” said Steve Wiesner, president of Zuma Capital Partners LLC, a Sherman Oaks-based special situations research firm that has analyzed Jafra. “This makes potential buyers nervous.” Jafra, spun off by The Gillette Co. because the marketer did not fit its strategic plan, was acquired in 1998 by Clayton, Dubilier & Rice Inc., a New York-based buyout firm that saw in the company potential for growth in the U.S. as well as Latin America. But Jafra, with sales of $380 million last year, has had difficulty penetrating the U.S. market. In the U.S., Jafra has been overshadowed by Avon, the 800-pound gorilla that commands the lion’s share of door-to-door and party cosmetic sales. Meanwhile, its expansion plans in Latin America have been stymied by the economic climate in countries such as Brazil and Argentina. CD & R;, which paid $226.5 million for Jafra, said it is close to a deal. “Negotiations are ongoing, and they’re currently talking to a buyer,” said a company spokesman. CD & R; would not comment on its asking price, but others say it is likely to be in the range of $400 million. There have been numerous bites at the Jafra apple since it was put up for sale in April, but most have fizzled, sources said. Besides the heavy concentration of sales in Mexico, investors have been scared off by Jafra’s expansion plans in South America. Much of the region is in economic crisis and debts are mounting. Add to that a general malaise in the mergers and acquisitions markets overall, and Jafra’s prospects are slim, sources said. “The M & A; market is a lot weaker than it was a few years ago,” said Robert J. Pearlman, partner at BDO Seidman in Westlake Village. “People are afraid to venture into transactions.” Pearlman was not familiar with Jafra’s situation, but he said that, in general, companies are not commanding fair values in the current climate.
Jafra’s Beauty Is Too Deep In Mexico for Most Buyers