Elizabeth Arden Inc. (RDEN) to Be Acquired by Revlon in $870M Transaction

Elizabeth Arden Inc. (RDEN) to be Acquired by Revlon in $870M Transaction

Shares of Elizabeth Arden Inc. (RDEN) were up +4.48 or +48.12 percent to $13.79 per share in Friday’s premarket. The stock’s rally came after news that the company would be taken over by Revlon (REV) broke late yesterday after the market close.
Elizabeth Arden Inc. stock closed at $9.31 per share, down -0.02 or -0.21 percent in Thursday’s regular trading session.

Stock Analysis

Founded by Elizabeth Arden as Red Door salon on New York’s Fifth Avenue in 1910, Miramar, Florida based Elizabeth Arden Inc. has been through a series of different owners since being taken over by Eli Lilly (LLY) in 1971. Lilly sold the company to Faberge in 1987, while the cosmetics division, which makes up the present company, was bought by New York firm FFI in 2003, which listed the company publicly as Elizabeth Arden. The company specializes in fragrances, skin care products and treatments and make-up sets.

New York City based Revlon Inc. is a multinational company founded in 1932 specializing in cosmetics, fragrances, and skin and personal care products. The company has also had a long list of owners beginning with Pantry Pride’s acquisition in 1985 at $58 per share, a subsidiary of Ron Perelman’s MacAndrews & Forbes. The acquisition was aided by Drexel Burnham’s junk bond maven, Michael Milken and saddled Revlon with a large amount of debt. Perelman continues to be a controlling shareholder.

The definitive agreement, announced late yesterday will have Revlon, Inc. acquire all outstanding shares of Elizabeth Arden for $14.00 per share in cash. The stock component of the deal is worth about $419 million and is a 50 percent premium over Elizabeth Arden stock’s closing price on Thursday. Including debt, the deal has an enterprise value of approximately $870 million. The takeover is great news for Elizabeth Arden shareholders, with the company having posted lower than expected revenue in six of the last eight quarters.

Scott Beattie, Chairman, President and Chief Executive Officer of Elizabeth Arden, said in the joint press release that, “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. We look forward to working with the Revlon leadership team to create a leading global beauty company, able to provide accelerated growth for the Elizabeth Arden-branded products as well as our prestige licensed fragrance portfolio, and broader opportunities for many of our employees.”

Revlon expects the merger will boost its presence in the luxury skin care and fragrances businesses, with Elizabeth Arden’s brands such as Ceramide, SuperStart and Prevage. Elizabeth Arden’s fragrances have been licensed by well-known celebrities such as Justin Bieber, Taylor Swift and Britney Spears. Cost synergies from the deal are expected by Revlon to be about $140 million.

Revlon said it expects net sales of the merged company to be $2.0 billion - $2.1 billion on a constant currency basis with the exclusion of acquisition costs, implying a high single digit growth rate in net sales. Adjusted earnings before taxes, interest, depreciation and amortization are forecast by Revlon to be between $400 million to $420 million for the year.

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Published on Jun 17, 2016
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2016. Content published with author's permission.

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