Cosmetics company Revlon announced Thursday that it is buying rival Elizabeth Arden, adding Giorgio Beverly Hills and celebrity fragrances from signers such as Taylor Swift and Justin Bieber to its portfolio.
Chris Woodyard of USA Today has the news:
Revlon plans to pay $14 a share, about a 50% premium, in a bid to expand its own global reach while adding Elizabeth Arden’s core skin-care line.
In a conference call, the CEOs of both companies said the deal with strengthen the brands across the board, from mass market to boutique businesses like salons, while piling up some big cost savings. Although Elizabeth Arden alone has business in 120 countries, about 57% of the combined companies’ business will be from sales in the U.S.
“This acquisition is strategically and financially compelling,” said Revlon CEO Fabian Garcia in a statement. “Revlon plans to build on Elizabeth Arden’s ongoing transformation by further enhancing the brand.”
On the call, Garcia called Elizabeth Arden a “highly respected” brand around the world. Now, he said, it will only become stronger. “The combined company will provide us with an excellent platform for growth.” As a top-20 company in its categories, “We will be more competitive because we will have greater scale.”
Stephanie Wong and Lauren Coleman-Lochner of Bloomberg News report that the deal is Revlon’s attempt to revive its cosmetics operation:
The deal marks a turnabout 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 in the offing.
Instead, Revlon is turning to another well-known cosmetics name that has struggled to maintain growth in recent years. The deal will allow Revlon to expand its footprint in fragrances and skin care, Garcia said on the conference call. 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 $2.6 billion to help pay for the acquisition and refinance Elizabeth Arden’s debt, Revlon said. The company expects cost savings of about $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 $14 in late trading after the purchase was announced, in line with the transaction price. Revlon rose less than 1 percent to $31.30.
Jessica Kuruthukulangara of Reuters notes that Elizabeth Arden is stronger in some product lines than Revlon:
Elizabeth Arden has a strong presence in the luxury skincare market, mainly in the anti-aging category, with brands such as Prevage, Ceramide and SuperStart. Its fragrances include those licensed from celebrities such as Britney Spears, Justin Bieber and Taylor Swift.
Revlon is stronger in hair color and color cosmetics, which are mainly distributed through mass retail channels and beauty salons across 130 countries.
“The combination will leverage Revlon’s scale across major vendors and manufacturing partners, improving distribution and procurement,” the companies said, adding that they expected cost synergies of about $140 million from the deal.
Elizabeth Arden has reported lower-than-expected revenue in six of the past eight quarters as it loses customers to rivals with more exclusive offerings.
