Shaklee Corp., a vitamin, household goods and personal care products company whose growth has stalled in recent years, agreed Monday to acquire mail-order company Bear Creek Corp. from RJR Nabisco for $123 million in cash.
Bear Creek, based in Medford, Ore., markets fruit and gourmet foods through its Harry & David subsidiary. Bear Creek's other major unit, Jackson & Perkins, sells rose bushes and other plants through the mail and in nurseries.
"This is a whole new day for Shaklee," said David M. Chamberlain, Shaklee's president and chief executive. Until now, Shaklee's products have been sold exclusively through an evangelical network of independent distributors who work mostly out of their homes.
Chamberlain called the purchase of Bear Creek "consistent with our strategy for leveraging Shaklee's strengths in a planned, thoughtful and determined manner that maximizes shareholder value for the long term." The transaction is expected to close Dec. 31.
Shaklee Stock Falls
But investors, perhaps hoping that Shaklee would use its large cash hoard to buy back Shaklee stock, reacted negatively to news of the transaction. Shaklee's stock plunged $2.625 in heavy New York Stock Exchange trading to close at $22 a share. RJR Nabisco, which has been selling off units that don't fit in with its new packaged-goods orientation, closed at $52.50, up 37.5 cents a share on the New York Stock Exchange.
Bear Creek expects to earn between $12 million and $13 million in 1986 on revenue of about $150 million. Chamberlain said he expects that the newly acquired company, which will continue to operate under its current management, will increase Shaklee's earnings next year and should grow at a rate of 10% a year.
Shaklee, based in San Francisco, also said it expects to report net income before special items of $17 million on sales of $400 million in the fiscal year ended Sept. 30, 1986. Including special items--principally proceeds from the initial public offering of a 20% stake in its Japanese subsidiary--Shaklee's fiscal year net income will approximate $59 million, the company said.
Sales Peaked in '83
Shaklee's sales have fallen for three years in a row after peaking in 1983 at $538.7 million. The company has been hurt by intense competition in the nutritional products field and, like other companies in the direct sales industry, has had trouble recruiting and retaining distributors as more and more women joined the work force on a full-time basis.
Still, the company has continued to generate a lot of cash; even after the Bear Creek acquisition, Shaklee will have about $50 million left in its coffers.
Chamberlain noted that in scouting around for potential acquisitions, Shaklee was constrained by "our strong culture built around nutrition and health." Many Shaklee salespeople eat health food, eschew white sugar and embrace Shaklee's claim that its products are manufactured "in harmony with nature and good health." Shaklee salespeople will likely have few objections to Harry & David's "Fruit of the Month Club" but may balk at such offerings as its chocolate torte, grasshopper cheesecake and smoked sausage.
Still, Chamberlain said the company will explore the possibility of selling at least some of Bear Creek's products through the Shaklee sales force. Shaklee was founded by a charismatic chiropractor who died last December.