Revlon Inc is to acquire Elizabeth Arden Inc for about US$419 million, a wager that uniting two aging cosmetics giants could reinvigorate both companies’ brands.
The US$14-a-share deal values Elizabeth Arden at about US$870 million when debt is included, New York-based Revlon said on Thursday. The cash transaction represents a 50 percent premium to Elizabeth Arden’s closing price of US$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 favor with consumers. The merger would bring together the 84-year-old Revlon with the 106-year-old Arden business in the hopes that a combined distribution network and marketing strategy could broaden their appeal.
Photo: AP
“We see great opportunities for growth where they are strong and we are not,” Revlon chief executive officer Fabian Garcia said on a conference call.
The deal would allow Revlon to expand its footprint in fragrances and skin care, Garcia said.
The company also sees growth opportunities in key regions that Elizabeth Arden is strong in, such as China and other Asian countries, he said.
Bank of America Corp and Citigroup Inc have committed about US$2.6 billion to help pay for the acquisition and refinance Elizabeth Arden’s debt, Revlon said.
The company expects cost savings of about US$140 million 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 US$14 in late trading after the purchase was announced, in line with the transaction price. Revlon rose less than 1 percent to US$31.30.
In addition to offering skin care and makeup, Elizabeth Arden is known for selling fragrances under names such as Taylor Swift, Britney Spears and Elizabeth Taylor. The celebrity endorsements have not helped the company cope with a competitive market for cosmetics. It posted almost US$400 million in losses during the past two years.
Elizabeth Arden CEO Scott Beattie said on the conference call that the financial strength of the new combined firm would help attract new licenses in perfumes. He also expects the merger to drive growth in some existing fragrance brands that have languished.
Both companies are coping with the shift to e-commerce, something Revlon has done better at so far, L2 Inc analyst Giulia Prati said.
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