Revlon will acquire Elizabeth Arden for about $419 million, a wager that uniting two aging cosmetics giants can reinvigorate both companies' brands.
The deal values Elizabeth Arden at about $870 million when debt is included, New York-based Revlon said on Thursday. The cash transaction represents a 50% premium over Elizabeth Arden's closing price of $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 will 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 can broaden their appeal.
Elizabeth Arden reported nearly $298 million in advertising and promotion spending last year on sales of just under $950 million. Revlon spent $375 million on advertising on sales of $1.9 billion. The deal values Arden, which has seen declining sales in recent years, at under one times sales, a bargain price for a prestige beauty brand.
"We see great opportunities for growth where they are strong and we are not," Revlon CEO Fabian Garcia said on a conference call. It brings Revlon into a prestige business that's been healthier than mass in recent years, and takes the brand deeper into fragrances and skin care. Mr. Garcia also sees benefit for Revlon from Arden's strength in China and other Asian countries.
The deal marks a turnabout after Mr. 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, though it also was met with skepticism by some industry watchers who saw no likely strategic or private-equity buyers for Revlon.
Speculation that Revlon would be acquired was quelled in March when the company named Mr. Garcia as CEO and said the former Colgate-Palmolive Co. executive would revamp the business. Revlon's previous CEO, Lorenzo Delpani, stepped down on March 1, citing personal reasons.
In addition to offering skincare and makeup, Elizabeth Arden is known for selling fragrances under names such as Taylor Swift, Britney Spears and Elizabeth Taylor. The celebrity endorsements haven't helped the company cope with a competitive market for cosmetics. It has posted almost $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 combined company will help attract new licenses in perfumes. He also expects the transaction to drive growth in some of its existing fragrance brands that have languished.
-- Bloomberg News with additional reporting by Jack Neff