Interest in Kanebo Acquisition Intensifies
TOKYO — What company might take over Kanebo’s $2 billion beauty business?

Included on the list of firms reported to have shown an interest are Japanese companies such as Kao Corp., Shiseido and Kose, plus non-Japanese beauty giants such as L’Oréal and Procter & Gamble.

This story first appeared in the July 28, 2005 issue of WWD. Subscribe Today.

Kanebo’s cosmetics operation, which generated 204 billion yen, or $1.84 billion dollars at average exchange rates, for the fiscal year ended March 31, 2004, was spun off of the heavily indebted firm last year under a restructuring plan backed by the state corporation bailout agency Industrial Revitalization Corp. of Japan.

Industry specialists have varying views on which company in Japan might be the front-runner in a possible bid for an acquisition of Kanebo and Kanebo Cosmetics.

Kao has popped up on the short list.

“Kao shows strong interest in taking over Kanebo’s cosmetics businesses,” said Hideo Sato, a beauty business consultant.

And this wouldn’t be the first time. As reported two years ago, Kao, Japan’s largest household products manufacturer, was in talks with Kanebo Ltd. to buy Kanebo Cosmetics. But talks unraveled in the final hour after union opposition.

Shiseido has also announced that it is keen to bid on Kanebo, but some analysts aren’t bullish on the marriage.

One analyst, who requested anonymity, said there might be too much crossover in terms of product type to make a Kanebo deal of real interest to Shiseido.

Kose, possibly in alliance with other firms, is reportedly only interested in buying Kanebo’s cosmetics division, despite IRCJ’s expectation to sell Kanebo and Kanebo Cosmetics together.

According to an IRCJ statement issued in April, Kanebo is on the road to recovery. IRCJ said: “Kanebo today is operating under an appropriate management structure” and “currently making steady efforts toward the realization of its business revitalization plan.”

As reported, Kanebo’s restructuring plan was made public after the firm’s announced insolvency of 357.7 billion yen, or $3.19 billion, for the fiscal year ended March 31, 2004.
— Koji Hirano

Nu Skin Earnings Gain 12.3%
NEW YORK — Nu Skin Enterprises Inc. reported robust second-quarter profits on a 9 percent revenue gain.

For the period ended June 30, earnings increased 12.3 percent to $22.8 million, or 32 cents per diluted share, from $20.3 million, or 28 cents per share, as sales climbed to $310.1 million from $284.2 million. Earnings results include the benefits of currency exchange.

For the six months ended June 30, earnings grew 16.4 percent to $40.5 million, or 57 cents per diluted share, from $34.8 million, or 47 cents per share, a year prior.

Overshadowing the strong results were concerns of the impending direct-selling regulations in China. In a conference call, Truman Hunt, president and chief executive officer, laid out the company’s plans to ease into the transition of direct selling in that country.

“We continue to believe that China will very quickly become one of the top three direct-selling markets in the future. Our business in China was built with eventual direct selling in mind, but because we are aware of potential transition challenges, we have been very proactive in educating our sales force in anticipating becoming a direct seller. Whenever changes are made, there is always an absorption period required, but I believe our transition in China will be considerably smoother than what some of our competitors faced.”

The worry, though, was simply in anticipation. Nu Skin’s revenue in Greater China still increased 8 percent in the second quarter, to $64.1 million from $59.1 million.

Due to some currency volatility in Japan, the company revised its second-half guidance from 7 cents per share to 4 cents per share. The adjustment, however, does not effect its year-end guidance. The company expects third-quarter earnings per share of 29 to 30 cents, and fourth-quarter earnings per share of 32 to 34 cents.
— Amy S. Choi

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