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Mary Kay set to acquire Shanghai office building

A Mary Kay store in China Photo:

U.S. cosmetics company Mary Kay Inc. is in talks to buy an office building in Shanghai as part of its expansion plans in China, bucking the trend in a country where rivals have eased back.

The Texas-based direct-sales beauty company said in an emailed statement that it is in negotiations to buy the Point Jingan, an 11-story building in the central Jing An District in Shanghai. The price could total 820 million yuan ($135 million), said people who have been briefed on details of the sale.

"Because of the growth we've experienced in China and in many of our other markets around the world, we constantly evaluate our facilities and offices to make sure we have the right resources to sustain our growth," said Coco Zhang, a spokeswoman for Mary Kay in China based in Shanghai.

This would be the company's first office building purchase in China, Ms. Zhang said. It owns a factory in the eastern Chinese city of Hangzhou, she said.

Mary Kay, which awards pink Mercedes Benzes to its top salespeople in China, first entered the country in 1995. It said on its website that its sales in China have risen 64-fold since 1998.

China has been a booming source of growth for the cosmetics industry over the last decade, with many women and even men trying out skin care for the first time. But Internet competition has redrawn the cosmetics and personal-care market, giving smaller brands greater access to China's 1.34 billion consumers.

French cosmetics maker L'Oréal SA said in January it would no longer sell the Garnier mass market brand in China so that it could focus on its L'Oréal Paris and Maybelline lines. Revlon Inc., which sells namesake products and Almay brands, unveiled in late December plans to exit from operations in China, eliminating 1,100 jobs there. Revlon executives said the business model in China, which relied on beauty advisers who worked at Revlon makeup counters in malls, was costly and relied on a large workforce.

Rival Avon Products Inc. has acknowledged missteps in China and in its most recent quarter reported a 67% decline in revenue for its operations in the country. Company executives have said that they are strategizing on how best to compete in China.

The seller of the Point Jingan is a joint venture made up of units from Hong Kong-listed firms Nanyang Holdings, Van Shung Chong Holdings and Celestial Asia Securities Holdings, according to a statement on the Hong Kong Stock Exchange website from late January. The joint venture purchased the property in June 2007 for 420 million yuan, the statement said.

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