Mary Kay Founder Makes $381-Million Buy-Out Bid

DALLAS â€”  Mary Kay Cosmetics announced Thursday that the company founder and her son have proposed a $381-million leveraged buy-out plan that would “return the company to family ownership.â€�

Mary Kay Ash, founder and chairwoman, and her son Richard R. Rogers, president and chief executive, led an investor group of senior management in proposing the buy-out, said Dean Meadors, company spokesman.

Shareholders under the plan would receive $10 in cash and $8.15 in principal amount of subordinated debentures for each of the approximately 21 million publicly held shares, Meadors said.

“The company’s chairman and president indicated their proposal is based on their desire to return the company to family ownership on a basis that provides fair treatment to all shareholders of the company,� the company said in a prepared statement.

Mary Kay, which produces and markets cosmetics and skin-care products directly to customers, had first-quarter net earnings of $5.6 million on revenue of $60.4 million, Meadors said.

Ash, along with Rogers and other members of senior management involved in the buy-out, currently own 30% of the company’s shares, Meadors said.

The rest that are held publicly would be bought back and the company taken private.

“This (management) group will make a substantial investment in the ongoing company through the acquisition by them of equity and subordinated debt totaling $127 million, which will provide a significant portion of the necessary financing.�

The remainder of the financing is expected to be provided in large part from various banks, including Bank of New York, which has agreed to provide a significant portion of the bank financing and to act as agent in assembling a bank group, the announcement said.

Mary Kay had 1984 net income of $33.8 million on revenue of $277.5 million, down from 1983 results of $36.6 million on $323.8 million in revenue. The company employs 1,340 people, 1,100 of whom are in the Dallas area.

Rogers announced to company personnel that an independent committee of directors will be appointed to review the transaction, Meadors said.

The company said the debentures are proposed to be for a term of 20 years, bearing no interest for about five years and 14.75% thereafter, and will benefit from a sinking fund beginning in 1996.