Revlon acquires Elizabeth Arden

REVLON will acquire Elizabeth Arden for about $419 million (R6.36 billion), a wager that uniting two ageing cosmetics giants can reinvigorate both companies’ brands.

The $14-a-share deal valued Elizabeth Arden at about $870m when debt is included, New York-based Revlon said this week. The cash transaction represents a 50 percent premium over Elizabeth Arden’s closing price of $9.31.

Revlon, controlled by billionaire Ron Perelman, sees an opportunity to revive the fortunes of Elizabeth Arden, an unprofitable company whose celebrity-branded fragrances have lost favour with consumers. The merger will bring together the 84-yearold Revlon with the 106-year-old Arden business in the hopes that a combined distribution network and marketing strategy can broaden their appeal.

“We see great opportunities for growth where they are strong and we are not,” Revlon chief executive Fabian Garcia said.

Shares lift

The deal marks a turn-about for investors, who had been speculating earlier this year that Revlon might be an acquisition target rather than a buyer. Perelman’s investment firm, MacAndrews & Forbes, announced in January that it would explore strategic alternatives for Revlon. That sent the shares surging as shareholders wagered that a buyout of the company was coming.

Instead, Revlon is turning to another well-known cosmetics name that struggled to maintain growth in recent years.

The deal would allow Revlon to expand its footprint in fragrances and skin care, Garcia said.

The company also saw growth opportunities in key regions that Elizabeth Arden was strong in, such as China and other Asian countries, he said.

Bank of America and Citigroup had committed about $2.6bn to help pay for the acquisition and refinance Elizabeth Arden’s debt, Revlon said. The company expects cost savings of about $140m from the merger by eliminating duplicated operations, gaining purchasing power and sharing a distribution network.

Elizabeth Arden shares soared as much as 50 percent to $14 in late trading after the deal was announced, in line with the purchase price. Revlon rose less than 1 percent to $31.30.

Speculation that Revlon would be acquired was quelled in March when the company named Garcia as chief executive and said he would revamp the business. – Bloomberg