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JEFFREY MARTIN, CONSIDERING MERGER, HIRES INVESTMENT BANKER MORGAN STANLEY

Executive Summary

Jeffrey Martin is putting its consumer product brand names on the auction block. The firm said in a June 18 press release that it has retained investment banker Morgan Stanley "to explore potential strategic alternatives for the company including the possible merger" of the company with one of several other consumer product companies. The company's line of familiar brand names includes: Topol smoker's toothpolish, Doan's Pills, Compoz, Lavoris mouthwash, Porcelana, Cuticura, and Ayds appetite suppressants. The product trademarks represent the saleable assets of the company. Jeffrey Martin's operating strategy has been weighted heavily toward promotional and advertising support for the brand names, with an emphasis on low overhead and a bare-bones attitude toward fixed assets. Jeffrey Martin has struggled in fiscal 1986. Revenues for the first nine months plunged 18.4% to $40.6 mil., and the firm booked a net loss of $234,000. Chairman and CEO Martin Himmel attributed the poor results to slackening sales of Topol, the company's highest volume product, in an extremely competitive toothpaste market. In the last fiscal year ended July 31, 1985, the firm reported net earnings of $4 mil. on sales of $65.6 mil. Jeffrey Martin went public in 1983 ("The Pink Sheet" May 23, 1983, p. 9). Based on past acquisitions of other consumer products business, such as Norwich Eaton and Richardson Vicks by Procter & Gamble, Jeffrey Martin could fetch between 15 and 22 times 1985 net earnings, placing the rough value of a merger between $60-$88 mil.
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