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Stocks B / Bare Escentuals

URL:  http://boards.fool.com/this-stock-is-a-complete-dog-private-equity-27155516.aspx

Subject:  Re: Competitors? Discontinued Products? Date:  11/2/2008  11:08 PM
Author:  rwandamassacre Number:  118 of 121

This stock is a complete dog. Private equity investors loaded it up with debt to pay themselves huge dividends and then sold the empty carcass to sucker public investors:

"The case of San-Francisco's Bare Escentuals Inc. (BARE ) shows how reliant firms have become on public stock investors. In 2005 the cosmetics maker took on $412 million in debt, mostly to pay its owners, Boston's Berkshire Partners and San Francisco's JH Partners, a total of $309 million in dividends and "transaction fees" in two installments eight months apart. The payments were a stretch for a company that earned only $24 million in 2005. In September, 2005, Standard & Poor's revised its outlook for the company to "negative" from "stable," citing its "very aggressive financial policy."

Yet Bare Escentuals' owners, who bought the company in June, 2004, kept coming back to the trough. In June, 2006, despite S&P's decision in May to lower the company's credit rating from to B to B- and the company's soaring debt-payoff costs, Bare Escentuals began to borrow again to pay its owners even larger amounts: a $340 million dividend, $218,00 in management fees, and $1.8 million in stock for arranging the dividend.

On Sept. 29, investors picked up the tab through an IPO. Most of the money raised was used to repay debt, except for $1.8 million that went to the owners "as consideration for the termination of our management agreements with them." Bare Escentuals and its owners declined to comment on the payments."

http://www.businessweek.com/magazine/content/06_44/b4007001....

Randy
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