By Colin Kruger
Makeup mogul Zoe Foster Blake is poised to make the deal of the decade with the woes of collapsed cosmetics empire BWX Ltd offering her an opportunity to win back full control of her Go-To business at a bargain-basement price.
Less than two years after negotiating an astounding $90 million price tag with BWX for half of Go-To, Foster Blake’s social media star wattage makes her the strongest candidate to buy it back for as little as $20 million.
Zoe Foster Blake currently owns around 40 per cent of Go-To and is the cosmetic group’s chief creative officer.Credit: Joe Armao
It’s perhaps the only silver lining from the collapse of a business that has made fools of both professional money managers and billionaire Andrew Forrest, who has almost certainly torched the $36 million he invested in BWX less than a year ago.
Meanwhile, the fallout is only just beginning for Australia’s largest financial institution, the Commonwealth Bank, after it effectively triggered the BWX collapse this week. Along the way the bank also cruelled the comeback being plotted by the newly appointed board and chief executive of BWX.
It does not change the outcome for Foster Blake. The sale of BWX’s 50.1 per cent stake in Go-To is one of the crucial steps to solving the company’s debt problems, which makes and sells top-selling brands such as Sukin and Mineral Fusion through Chemist Warehouse, Coles and Woolworths stores.
With finding a buyer for that 50.1 stake critical to resuscitating BWX’s fortunes, Foster Blake is in an almost unassailable position to swoop in and take full control of Go-To. While there will be rival bidders, these outsiders face an insurmountable problem.
Foster Blake is at the centre of the Go-To universe and no deal can hold together without her blessing. Anyone harbouring any doubts about this fact just needs to read the fine print of the announcement less than two years ago when BWX bought its stake in Go-To stake
At the time, BWX touted the one million-strong social media following for the Go-To brand, which continues to underpin the success of its direct-to-consumer focused model. What’s far less publicised by BWX is that much of that social success is inextricably tied to Foster Blake.
Around 70 per cent of Go-To’s social media following is from Foster Blake’s Instagram account, which is more than double Go-To’s base of followers.
The BWX announcement at the time, also made it clear that Foster Blake retains ownership of key intellectual property and cited her relationship with the business as a “key woman risk”.
“The loss of founder and brand ambassador ... could have a materially adverse impact on Go-To and its activities and financial performance,” it said.
Foster Blake declined to comment, but Go-To gave this masthead the first indications that BWX might be ready to offload its controlling stake last month, with a statement highlighting its independence from the already embattled ASX-listed group.
“Go-To operates as an independent entity, managing its own treasury, formulations, manufacturing and retailer relationships. We have an independent Sydney-based team led by our CEO, Brad Dransfield, and no financial, manufacturing or supplier affiliations with BWX,” Go-To said.
That puts Go-To in a much better position to control its destiny, even as BWX tries to find a way to keep the likes of Sukin and Mineral Fusions alive. The BWX appointed administrators, and CBA’s receivers, have both confirmed that the Go-To sales process will continue but would not give any indication of when a deal might be reached.
Zoe Foster-Blake with her husband, comedian and TV host Hamish Blake.Credit: Getty
For the BWX insiders, who had planned to use the sale of the Go-To stake and BWX’s US retail operation as a springboard to rejuvenate the core Australian business, their sense of grievance against CBA and its advisers from KPMG, is palpable.
BWX’s new executive team hit the ground running on February 27, with a new chief executive in Thinus Keeves and chairman Steven Fisher. The company had conducted a clean sweep of the board and executive suite as demanded by CBA.
In less than five weeks, the new team was on the cusp of selling its 50.1 per cent stake in Go-To and its US business to private equity group Quadrant. The deal would have given the company enough financial breathing space to revive its Australian business and seek out further funding.
But CBA would not budge on its March 31 deadline for BWX to get its financing in order. The bank had been supporting BWX, despite loan breaches, since November last year on debts that topped $105 million by the end of December.
BWX shareholders, including billionaire Andrew Forrest, will likely be wiped out by the collapse.Credit: Bloomberg
The bank, as it seems, has clearly run out of patience, leaving BWX’s new management bewildered as to what more it could have done. Undoing the misfortune suffered by the previous leadership team - a string of loss-making investments and the practice of channel stuffing, which involves retailers inflating sales by “selling” more products to their distributors than they can readily sell to consumers - was always going to take more than just a few months.
The channel stuffing turned out to be particularly costly for BWX, as it burned through cash while distributors sold the excess stock, which did not generate any fresh revenue for the business.
Last weekend, in direct talks with the BWX CEO and its chairman, CBA executives made it clear that the group was not going to get its debt waivers extended to May. The board was forced to appoint administrators on Monday. CBA appointed receivers on Tuesday to take charge of the business and work out how to extract the $105 million it is owed.
“If that was going to be a foregone conclusion, why ask for a new board and management?” one BWX insider exclaimed after their frantic attempt to save the company over the previous five weeks.
With the receivers now in control, BWX staff are no longer allowed to speak on the company’s behalf. “That’s the most heartbreaking thing, we had a plan there, we just needed 6 weeks,” said the insider.
The problem for CBA, however, is that it is not a venture capitalist looking for a good turnaround story. It is a bank looking for safe borrowers.
The bank declined to comment, and it is likely that the one big reason for its decision to not give BWX more time was that despite its best efforts BWX failed to find a private equity-style turnaround specialist willing to take the project on.
Allegro Funds had looked at the possibility of taking over CBA’s loans - and effectively wipeout investors like Forrest’s Tattarang with a debt for equity swap - but the talks went nowhere.
Tanarra Capital’s John Wylie. Credit: Alex Ellinghausen
Conversations with John Wylie’s Tanarra Capital were also unsuccessful.
Despite CBA digging in its heels, there remains a road back for the BWX business.
The receivers led by KPMG’s David Hardy have made it clear that Sukin, and the other brands like Andalou Naturals and Mineral Fusion, will be nurtured through the receivership.
“As receivers, our initial focus will be on stabilising the operations of these much-loved brands, before commencing an orderly sale process. We will be working with all stakeholders, including employees, suppliers, partners and customers, to maximise the outcome for all parties,” Hardy said.
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