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EXCLUSIVE REPORTS

$500M Bees-ness?

With purchase, brand could emulate likes of Coty, Arden

DURHAM - With a well-heeled new owner buzzing about to bankroll the hive, Burt's Bees is expected to grow from a $50 million niche manufacturer of natural beauty products to a $500 million-a-year national brand within as few as five years.

AEA Investors, the private equity firm expected to buy Burt's Bees for approximately $180 million, then would spend generously to market and distribute the Durham-based company's lotions, lip balms, cosmetics and other personal products, says a source close to the acquisition.

Retail consultants say the quirky company could enjoy such a rise if it makes the right moves.

"The whole personal care area has been a hot growth area for the last 10 years, pretty much in all segments of retail," says Anne Brouwer, a partner in the Chicago-based consulting firm McMillan Doolittle. The grooming boom has rippled through department stores, spas and high-end specialty shops and even filtered down through discount stores, supermarkets and drug stores, she says.

It's a big market that awaits a move by Burt's Bees to widen its folksy foothold, Brouwer says. "I think that they have quality products."

But could the maker of "Carrot Seed Oil Complexion Mist" and "Doctor Burt's Lavender Mint Toothpaste" reach the same stratosphere as a L'Oreal or Procter & Gamble?

"They have work to do," says Steen Kanter, founder of Kanter International, a firm that helps retailers strategize.

"It can be done," Kanter says. "Elizabeth Arden was niche once." These days, Elizabeth Arden has actresses Liz Taylor and Catherine Zeta-Jones promoting products. Arden reported $279 million in revenue for the first half of the year.

Coty signs Celine Dion

Privately held Coty aligned this year with Canadian diva Celine Dion to launch a line of products. The company estimates that its fragrances, cosmetics and other beauty products generate about $1.6 billion in annual net sales. The Body Shop, the U.K. company with operations in Wake Forest, posted $1.1 billion in revenue for the year ended March 2003.

AEA officials did not return phone calls. The firm has offices in New York, Stamford, Conn., and London. AEA has invested in the area, playing the lead investor in a September 2002 equity round for Research Triangle Park-based Nobex Corp.


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