|Sep 12, 2013
|CVSL seeks two more buys this year in direct selling space, four in 2014 - CEO
|CVSL (OTCBB: CVSL), a Dallas, Texas-based acquirer of direct selling companies, seeks two additional buys this year and four next year, according to founder and CEO John Rochon.
With a market cap of USD 160m and funding from Rochon Capital Partners and sovereign investment funds, CVSL is interested in direct sellers of various sizes, he said, with a sweet spot of annual sales of USD 100m.
Rochon is the former chairman and CEO of direct seller of cosmetics Mary Kay, and founder of Richmont Holdings, a closely held investment firm he heads; he amassed a 22% stake in Avon Products in an unsuccessful bid for control in the late 1980s. Rochon acquired CVSL last year.
Under Rochon, 61, CVSL seeks to acquire direct sellers in multiple product channels and several global markets, retain their management and separate brand identities, and create efficiencies with shared distribution facilities and back-office functions. Acquisitions would be financed with a combination of CVSL stock and cash raised from lenders and investors “who will understand our direct-selling acquisition strategy,” he said.
CVSL has acquired two direct sellers this year – The Longaberger Company, an Ohio-based basket maker, and Your Inspiration At Home, an Australian seller of spices. The company also signed letters of intent to acquire two others – Tomboy Tools of Colorado and Agel Enterprises of Utah. Tomboy sells ergonomically designed tools for women and home-security systems while Agel offers nutritional gels and skin-care products. CVSL received legal counsel from Henry Davis York on the Your Inspiration transaction, according to the Mergermarket database.
Longaberger was founded in rural Ohio by Dave Longaberger in 1973. After he died in 1999 and company leadership passed to his daughter Tami, sales declined from an estimated USD 1bn to USD 100m.
Rochon said he favors “companies that need to be fixed – second chance companies. The idea is to keep their charismatic leader and allow the companies to grow again.”
A source familiar with CVSL said the company recently sold a large position in Herbalife (NYSE: HLF) and has reached out to Blyth (NYSE: BTH) about acquiring a substantial stake, though CVSL’s current holding in Blyth remains below the 5% threshold that would trigger an SEC filing. Blyth is a designer and marketer of home decorative and fragranced products. Last month, Greenwich, Connecticut-based Blyth reported a second-quarter loss of USD 3.2m, and its stock is trading near its 52-week low. Blyth, which has a market cap of USD 170m, is led by CEO Robert Goergen, 74, and his son, Chief Operating Officer Robert, 42.
Rochon said numerous companies have approached CVSL expressing interest in becoming part of his umbrella concept. The potential deals represent combined revenue of USD 8.5bn, with an average of USD 100m, he said. The list includes companies in health supplements, cosmetics, jewelry, energy, nutrition and products for the home.
An industry executive said the direct selling space is not the easiest for M&A because each company has its own culture, but there have been some recent trends where private equity or family money are establishing public shells and buying up direct selling companies. CVSL's strategy is to be diverse and buy companies in niche segments, and to create efficiencies with best practices and shared logistics, warehousing and marketing.
CVSL has a relationship with investment banks, including UBS and Lampert Debt Advisors, Rochon said. Its law firm is Gardere Wynne Sewell of Dallas, and its accountant is PMB Helin Donovan of Austin, Texas.
Rochon wouldn’t name specific targets, but did say that this year the company made an unsuccessful bid for Kansas City, Missouri-based Silpada Designs, a division of Avon that was ultimately sold back to its founders for USD 85m.
Category priorities for the two acquisitions expected this year include resellers of energy or other business services and direct sellers in the fashion industry, especially couture bags and cut-and-sewn products, Rochon noted. Plans call for an acquisition each quarter next year.
by Jeff Sheban in Columbus, Ohio, and Ellena Kleinman in Fort Lauderdale, Florida