Strategy

Revlon to Acquire Elizabeth Arden for $870M

Elizabeth Arden's luxury skincare brands and celebrity fragrances could complement Revlon's strength in hair color and color cosmetics.
Katie Kuehner-HebertJune 17, 2016

Revlon has agreed to acquire Elizabeth Arden in an $870 million deal that adds premium beauty products to its portfolio and expands its reach to high-growth markets including the Asia-Pacific region.

Elizabeth Arden, which was founded in 1910, owns luxury skincare brands including  Prevage, Ceramide and SuperStart and licenses fragrances from celebrities such as Britney Spears, Justin Bieber and Taylor Swift.

Revlon said it would pay $14 a share for the company, a 50% premium to its closing stock price on Thursday. The equity value of the deal is $420 million but, including refinancing of Revlon debt, the enterprise value is about $870 million.

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In trading Friday, Elizabeth Arden shares were up 49% at 13.88, while Revlon climbed 7.2% to $33.41.

“This acquisition is strategically and financially compelling,” Revlon CEO Fabian Garcia said in a news release. “Elizabeth Arden and Revlon are both known for their iconic brands, entrepreneurial spirit and commitment to innovation, quality and excellence.”

Revlon’s strength is in lipstick and nail varnish, hair care and men’s grooming. With the acquisition, Forbes said, it will step into the premium beauty segment, which has regained  popularity after several years of lackluster demand.

The U.S. prestige beauty market grew by 7% to reach $16 billion in 2015, mainly due to the  importance of skincare among millennials.

“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,” Garcia said.

As The Wall Street Journal reports, both companies have “struggled in recent years. Revlon has been weighed down by its debt, while celebrity fragrances, a key part of Elizabeth Arden’s portfolio, have fallen out of favor.”

Elizabeth Arden has not generated an annual profit since 2013, while Revlon reported a profit of $11 million in the first quarter of 2016, following a $900,000 loss in the same quarter last year. Revlon’s controlling shareholder and Chairman Ronald Perelman recently disclosed he was exploring strategic alternatives for the company.

“The deal … will help the companies better compete with deep-pocketed rivals such Estee Lauder Cos. Inc.  and L’Oreal SA,” Reuters said.