Revlon Inc. announced on Thursday that it will be buying Elizabeth Arden Inc. for $14 a share, in an attempt to expand its portfolio to include fragrances and a larger worldwide distribution.
The deal represents nearly $870 million, which values Elizabeth Arden at that amount, according to a statement from Revlon announcing the decision. The transaction is a 50 percent premium over Elizabeth Arden’s closing price of $9.31, as reported by Bloomberg.
“Revlon plans to build upon Elizabeth Arden’s ongoing transformation by further enhancing the brand,” Revlon Chief Executive Officer Fabian Garcia said in the statement. “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.”
By bringing the two portfolios together, Revlon will benefit from greater scale and an expanded global footprint, as well as a significant presence across all the leading beauty channels and categories. The new additions include Elizabeth Arden’s growing prestige skin care products, color cosmetic, and fragrances, the statement added.
For the financial agreement, Merrill Lynch and Citigroup Global Markets Inc. 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.
Cost synergies of approximately $140 million are expected to be achieved by Revlon through the elimination of duplicative activities, leveraging purchase scale, and optimizing the manufacturing and distribution networks of the combined company. Also, the companies anticipated that they will achieve additional growth opportunities in both sales channels and geographies.
Scott Beattie, Elizabeth Arden’s coordinator, is committed to executing on the acquired company business plans, and it is expected from Revlon that he will join the New-York-based company board of directors as a non-executive vice coordinator. Beattie will also serve as a senior advisor to Revlon’s CEO, Fabian Garcia.
The transaction came as a surprise to many investors as Revlon itself was thought to be the one in the sale rather than the one buying. According to an announcement in January by MacAndrews & Forbes, Revlon’s parent company, strategic alternatives would be explored for Revlon.
A compelling acquisition
According to Garcia, the acquisition is strategically and financially compelling. Elizabeth Arden and Revlon are both known for their iconic brands, entrepreneurial spirit and commitment to innovation, quality, and excellence, he commented.
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, Garcia added.