CD&R sees five times return on Jafra exit

Clayton Dubilier & Rice is selling its stake in the international cosmetics business to Germany-based household appliance company Vorwerk.

Clayton Dubilier & Rice has agreed to sell its 84 percent stake in Jafra Cosmetics International to Germany-based household appliance and consumer products company Vorwerk.


Terms of the deal were not disclosed, though a source familiar with the deal said that the sale will yield CD&R approximately five times return on capital invested into the company. CD&R bought Jafra back in 1998 from Gillette for $200 million with equity from its Fund V and sunk approximately $77 million of equity into the business, the source said.


Last year, CD&R recapitalized Jafra, a leading direct seller of skin and body care products, for $275 million while in talks to sell the company to Avon Products for between $350 million and $400 million, according to news sources. However, Avon backed out of the deal at the last minute for unidentified strategic reasons. CD&R investors did end up receiving a $154 million distribution under the recapitalization plan.


Last month, Jafra, filed for a public offering, the primary purpose of which was to pay off about $70 million in high-yield debt that carries an interest rate of 10.75 percent, the filing said. Sales at Jafra have been booming thanks to an aggressive push to sign up cosmetics sales consultants in Mexico, according to news reports. Jafra reported net sales of $382.6 million in 2002, a 63 percent rise over the $241.9 million reported in 1998 at time of acquisition. Net income in 2002 was $18.8 million, up from $4.7 million in 1998. For the nine months ended Sept. 30, 2003, the company reported $276.7 million in net sales.


The Jafra sale is the latest in a swath of exits by CD&R, including December’s sake of copy center chain Kinko’s to FedEx for $2.4 billion. The firm also floated transportation company Sirva for approximately $350 million in November.


Debevoise & Plimpton represented CD&R in the sale of Jafra.