Betterware Mexico agrees to buy in 255 MDD operations of Jafra here and in the USA - Corporate news

Jan 18 (Axis Negocios) -- Betterware de México, a direct sales company for home solutions by catalog, announced that it has reached a definitive agreement to buy the operations in Mexico and the United States of the German company of beauty products and Jafra fragrances, an operation valued at 255 million dollars --five thousand 355 million pesos-- which fits with the consolidation of the sector worldwide.

The approaches between the two companies began when they signed a non-binding agreement on July 15 very early in mid-2021, Betterware said in a statement adding that the transaction is expected to close in the first half of the year upon receiving authorization from the Federal Economic Competition Commission, the regulator in charge of monitoring the healthy behavior of the markets in Mexico.

“We are excited to announce the acquisition of Jafra and believe it aligns perfectly with Betterware's strategy,” said Luis G. Campos, CEO of the direct-selling household products company. “We believe that Jafra has significant growth potential ahead through its digital transformation, which will be accelerated by leveraging our scale and infrastructure.”

In the world of direct sales in the personal care and beauty category, companies such as the Brazilian Natura also compete, which in 2019 acquired Avon Products to create until then the fourth largest beauty group in the world.

In Mexico, Natura's expectations were to become a leader in the direct sale of cosmetics and personal care products, surpassing companies such as Mary Kay and Jafra after the acquisition of Avon.

For Betterware, which became a Nasdaq public company by merging with “blank check” company --special purpose company, or SPAC-- DD3 Acquisition, the transaction will allow it to expand its geographic footprint to include more markets in North America and strengthen its position in Mexico, in addition to adding the beauty and personal care categories and incorporating 443,000 independent Jafra consultants that generate sales of approximately 5.8 billion pesos.

According to Betterware, the beauty and personal care industry represents an estimated total market in Mexico and the United States of approximately $100 billion per year.

In turn, the acquisition will allow the company to continue capitalizing on the trend of direct online sales and electronic commerce, which gained momentum as a result of the restriction measures for the operation of physical businesses by governments premises at the beginning of the health contingency.

Betterware said the purchase price implies a valuation multiple of approximately 5.5 times estimated 2022 enterprise value at EBITDA before identified cost synergies of between $5 million and $10 million, and 4.8 times estimated in 2022 from enterprise value to operating cash flow, considering the midpoint of synergies.

The payment will be made through a combination of debt (225 million dollars) and cash payment (30 million dollars), which will allow it to maintain low leverage and continue paying a quarterly dividend of 9.38 pesos per share .

This is not the only relevant operation that Betterware de México has carried out in recent times, since in March 2021 it announced the incorporation of voice and data services for cell phones.

To do this, the company listed on Nasdaq invested 45 million pesos (two million dollars) in cash to acquire a 60% interest in virtual mobile operator (MVNO) GurúComm.

César Pérez contributed to the preparation of this note.