Thin is no longer in at Jenny Craig, not when it comes to stock price. The popular weight-loss company has endured a steadily declining stock price, despite years of corporate belt-tightening and marketing efforts, and now plans to come off the public market.
Unable to overcome shrinking sales and profits, La Jolla, Calif.-based Jenny Craig agreed to sell out to an investor group led by ACI Capital Co. ACI Capital and its partner DB Capital Partners, the private equity arm of Deutsche Bank, along with Sid and Jenny Craig, who are also part of the investor group, are expected to bring in about $115 million in cash as a result of the public-to-private leveraged buyout. On the flip side, Jenny Craig stockholders will receive $5.30 per share in cash, representing a premium of approximately 68% to Jenny Craig’s $3.15 closing price on Jan. 25, 2002.
The purchasing group has also received a senior debt financing commitment from Ableco Finance and commitments from ACI Capital and DB Capital to provide equity and debt capital. The Craigs have agreed to contribute a portion of their holdings of Jenny Craig stock with a value – based on the $5.30 per share price – of $4 million for stock in the acquisition vehicle. The transaction is expected to close in the second quarter of 2002. And the agreement prohibits Jenny Craig from seeking out other offers.
After news of the agreement broke the first week of February, Jenny Craig’s stock reached its 52-week high and closed at $5.12 on the OTC Bulletin Board.
“ACI Capital and DB Capital have long histories of investing in growing companies,” Sid Craig, who, with his wife Jenny, co-founded the company in 1983, said in a statement. “This transaction is good news for our shareholders, clients and employees, [who] will benefit as we continue to grow our business through investment and expansion.”
Last August, Jenny Craig was delisted from the New York Stock Exchange and began trading on the OTCBB. At the time, rumors circulated that Artal Luxemborg, a private European firm that in 1999 purchased Jenny Craig competitor Weight Watchers, was considering making a bid for Jenny Craig.
Artal still owns 75% of Weight Watchers (NYSE:WTW), which went public in November 2001. The company has made back its original investment several times over.
After debuting 17.4 million shares at $24 per share, Weight Watchers stock is now trading at $35.45. Credit Suisse First Boston and Goldman Sachs co-managed the offering, which saw nearly $35 million added to the proceeds in a last-minute filing that increased the offering range to $23 to $25 per share from $21 to $23 per share.
Back to Basics
Insiders at Jenny Craig recognized that its own company’s stock had fallen over time and that advisers were hired to explore all options. A sale was the best alternative. As a result of the transaction, Kent Kreh, a former heavyweight at Weight Watchers, is joining Jenny Craig team as chairman. Matthew Bronfman, a managing director of ACI Capital, and Richard Wenz, a consulting partner of DB Capital, will each get a board seat.
Jenny Craig owns 652 centers worldwide. During the year ended June 30, 2001, the company reported revenue of $283.6 million.
Danielle Fugazy can be contacted at: