Ronald Perelman‘s Revlon Inc. (NYSE: REV) agreed to acquire Elizabeth Arden Inc. (NASDAQ: RDEN) for $14.00 per share in cash, including repayment of Elizabeth Arden’s debt and preferred stock, representing an enterprise value of $870 million. The purchase price represents a 50% premium over Elizabeth Arden’s closing share price of $9.31 on June 16, 2016. The combination will leverage Revlon’s scale across major vendors and manufacturing partners, improving distribution and procurement. Cost synergies of approximately $140 million are expected to be achieved through the elimination of duplicative activities, leveraging purchasing scale, and optimizing the manufacturing and distribution networks of the combined company. Revlon’s chairman Ron Perelman, who owns 78% of the company through his holding company MacAndrews & Forbes, was ranked by Forbes as the 32nd richest American, and 86th richest person in the world, with an estimated wealth of $12.3 billion, as of June 2016.
The move comes within two weeks after Johnson & Johnson (NYSE: JNJ) agreed to acquire Vogue International LLC from private Equity firm Carlyle Group LP (NASDAQ: CG) and the company’s founder and CEO Todd Christopher, for $3.3 billion. In comparison, “Revlon has a current market capitalization of $1.61 billion, less than half the astronomical price paid by J&J for Vogue International, which has far lesser known brands and a far smaller product and market footprint than either Revlon or Elizabeth Arden,” commented ExitHub’s CEO Norbert Mehl. “In that context, Perelman’s timely buyout of Elizabeth Arden would seem to be a bargain.”Vogue International is a manufacturer and distributor of salon-heritage hair care and other personal care products, which include the OGX collection of shampoos, conditioners, treatments, styling products, body care and bath products, the FX line of hair styling products, and the Proganix and Maui Moisture hair care lines. The Carlyle Group originally acquired 49% of Vogue International in February 2014 for about $400 million, while founder and CEO Todd Christopher had kept a 51% stake, giving the company an $800 million approximate total value at the time. “Revlon plans to build upon Elizabeth Arden’s ongoing transformation by further enhancing the brand, with even more vibrant and relevant product development and marketing, while carefully preserving its unique heritage within prestige,” said Revlon’s president and CEO Fabian Garcia. “Combining our brands, talent, and global distribution will give our company a significant presence in all major channels and categories, while accelerating sales growth in existing and new geographic regions.” “We believe this is a compelling transaction that delivers certain value to our shareholders, while recognizing the unique equity in the Elizabeth Arden brand, our impressive fragrance portfolio and global footprint, as well as the positive momentum and growth potential for our business,” said Elizabeth Arden’s chairman, president and CEO E. Scott Beattie, who is expected to join Revlon’s board of directors as non-executive vice chairman. “The deal price is roughly half of what Elizabeth Arden nearly sold for two years ago when it was trading close to $30 a share,” The Wall Street Journal said, adding that “both businesses have struggled in recent years. Revlon has been weighed down by its debt, while celebrity fragrances, a key part of Elizabeth Arden’s portfolio, have fallen out of favor.” In January, Perelman said he was exploring strategic alternatives for Revlon. In March, the company’s former CEO Lorenzo Delpani stepped down, and was replaced by Colgate-Palmolive executive Fabian Garcia. Revlon and Elizabeth Arden are facing intense competition from bigger rivals such as Estee Lauder Cos. Inc. (NYSE: EL) and L’Oreal SA (EPA: OREP), “whose deep pockets allow them to spend heavily on research and marketing new brands,” says Reuters. “In December, Revlon’s peer Avon Products Inc (NYSE: AVP) sold 80.1 percent of its North American business to Cerberus Capital Management LP after grappling with falling sales in the region for more than three years.” BofA Merrill Lynch and Citigroup Global Markets have committed approximately $2.6 billion of financing to fund the acquisition and refinance Elizabeth Arden’s existing debt, as well as Revlon’s existing bank term loan and revolving credit facility. Revlon’s existing senior notes will remain outstanding. Assuming full realization of expected multi-year synergies and cost reductions, Revlon expects pro forma leverage will be approximately 4.2x Net Debt/Adjusted EBITDA by the end of 2016. The transaction has been unanimously approved by both Revlon’s and Elizabeth Arden’s boards of directors. Rhone Capital LLC, which holds approximately 14% of Elizabeth Arden’s common stock and 20% of its voting interests, and Scott Beattie, who holds approximately 4% of Elizabeth Arden’s stock, have agreed to support the transaction. The deal is expected to close by the end of 2016 subject to customary closing conditions. Moelis & Co. served as lead financial advisor to Revlon. BofA Merrill Lynch and Citi also served as financial advisors to Revlon. Milbank, Tweed, Hadley & McCloy and Paul, Weiss, Rifkind, Wharton & Garrison LLP served as legal counsel to Revlon. Centerview Partners LLC served as financial advisor and Weil, Gotshal & Manges LLP served as legal counsel to Elizabeth Arden. Elizabeth Arden is a global prestige beauty products company with an extensive portfolio of beauty brands sold in over 120 countries. The company’s brand portfolio includes Elizabeth Arden skin care, color and fragrance products; its professional skin care line, Elizabeth Arden PRO; the designer fragrance brands of Juicy Couture, John Varvatos and Wildfox Couture; the heritage fragrance brands of Britney Spears, White Diamonds Elizabeth Taylor, Curve, Giorgio Beverly Hills, Ed Hardy, Jennifer Aniston, Lucky Brand, Paul Sebastian, Halston, Geoffrey Beene, Rocawear, Alfred Sung, White Shoulders and BCBGMAXAZRIA; and the celebrity fragrance brands of Taylor Swift, Nicki Minaj, Mariah Carey and Justin Bieber. Elizabeth Arden Inc. was founded in 1960 and is headquartered in Miramar, Florida. Starting in 1910, an age when it was rare for women to wear make-up much less run their own businesses, Florence Nightingale Graham (1878-1966), who went by the name Elizabeth Arden, opened her first Red Door salon on Fifth Avenue and began to build one of the world’s first global beauty brands. The Canadian-born American businesswoman founded what is now Elizabeth Arden Inc., and built a cosmetics empire in the United States. By the 1930s, Miss Arden had opened Red Door salons in the majority of the fashion capitals around the globe, and proudly acknowledged her accomplishments by proclaiming that there were only three American names known in every corner of the globe: Singer Sewing Machines, Coca-Cola and Elizabeth Arden. She was the sole owner, and at the peak of her career, she was one of the wealthiest women in the world. In 1962, the French government awarded Arden the Légion d’Honneur, in recognition of her contribution to the cosmetics industry. Elizabeth Arden Inc. licenses the trademarks for the Elizabeth Arden and Red Door brand names to Red Door Spa Holdings, the owner and operator of the Elizabeth Arden Red Door Spas, and Mario Tricoci Hair Salons. Red Door Spa Holdings is a privately-held company backed since 2010 by private equity firm North Castle Partners LLC, based in Greenwich, Connecticut. Red Door Spa Holdings, established in 2000, owns and operates 30 Red Door Spas in freestanding locations and upscale resort and hotel properties in the United States, and 13 Mario Tricoci Hair Salons in the Chicago metro area In September 2012, Elizabeth Arden Inc. partnered with J.H. Anderson Holdings Inc. and its principal John Anderson, a developer, owner, and manager of hotel and resort projects, to collectively invest $12 million for a minority interest in Red Door Spa Holdings. In addition, Elizabeth Arden Inc. and J.H. Anderson Holdings have an option to acquire the remaining interest in Red Door Spa Holdings. “Our intent in partnering with John Anderson and North Castle Partners is to accelerate the growth of the spa business in parallel with the growth of the Elizabeth Arden brand and the Elizabeth Arden brand repositioning,” Scott Beattie noted at the time. Revlon is a global beauty company that provides a range of cosmetics, hair color, hair care and hair treatments, beauty tools, men’s grooming products, antiperspirant deodorants, fragrances, skin care, and other beauty care products. Revlon’s Consumer segment global brand portfolio includes Revlon color cosmetics, Almay color cosmetics, SinfulColors color cosmetics, Pure Ice color cosmetics, Revlon ColorSilk hair color, Revlon Beauty Tools, Charlie® fragrances, and Mitchum antiperspirant deodorants. Revlon’s Professional segment global brand portfolio includes: Revlon Professional, CND, including CND’s Shellac brand 14+ day nail color and Vinylux weekly nail polish, and American Crew men’s grooming products. The company was founded in 1932 and is headquartered in New York, New York.]]>