Revlon to acquire Elizabeth Arden for $14.00 per share in all-cash transaction
Revlon, Inc.and Elizabeth Arden, Inc. have announced that they have signed a definitive agreement under which Revlon will acquire all of the outstanding shares of Elizabeth Arden for $14.00 per share in cash, representing an enterprise value for Elizabeth Arden of approximately $870 million.
By bringing together two highly complementary, iconic brand portfolios, Revlon will benefit from greater scale, an expanded global footprint, and a significant presence across all major beauty channels and categories, including the addition of Elizabeth Arden's growing prestige skin care, color cosmetics and fragrances. The combination will leverage Revlon's scale across major vendors and manufacturing partners, improving distribution and procurement. Cost synergies of approximately $140 million are expected to be achieved through the elimination of duplicative activities, leveraging purchasing scale, and optimizing the manufacturing and distribution networks of the combined company. The companies anticipate that they will achieve additional growth opportunities in both sales channels and geographies.
STRATEGIC BENEFITS
- Expanded Category Mix: Revlon's strength and expertise in color cosmetics, hair care, men's grooming, antiperspirants,deodorants and beauty tools will be complemented by the addition of Elizabeth Arden's world-class portfolio of licensed prestige fragrances and the internationally recognized line of Elizabeth Arden-branded prestige skin care, color cosmetics and fragrance products, highly profitable categories that are key to future industry growth.
- Channel Diversification: Elizabeth Arden's strong global reach in prestige distribution and travel retail will complement Revlon's strength in mass and salons, strongly positioning the combined company in all key beauty channels.
- Broader Geographic Footprint: Revlon currently sells its products in approximately 130 countries. With Elizabeth Arden's presence in important international growth regions, including Asia Pacific, the combined company will be better positioned to compete globally.
Fabian Garcia, President and Chief Executive Officer of Revlon, Inc., said: "This 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. 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. 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. We look forward to bringing together our two top-notch teams to form a global leader in beauty."
E. Scott Beattie, Chairman, President and Chief Executive Officer of Elizabeth Arden, said: "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."
TRANSACTION DETAILS
Under the terms of the agreement, Revlon will acquire all of the outstanding shares of Elizabeth Arden for $14.00 per share in cash, which represents a 50% premium over Elizabeth Arden's closing share price of $9.31 on June 16, 2016. The transaction, including repayment of Elizabeth Arden debt and preferred stock, implies an enterprise value for Elizabeth Arden of approximately $870 million.
BofA 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. Revlon's existing senior notes will remain outstanding. Assuming full realization of expected multi-year synergies and cost reductions of approximately $140 million, Revlon expects pro forma leverage will be approximately 4.2x Net Debt/Adjusted EBITDA by the end of 2016. The combined company will be well positioned to de-lever based on its anticipated strong cash flow.
Scott Beattie is committed to executing on Elizabeth Arden's business plans and it is expected that he will join Revlon's Board of Directors as non-executive Vice Chairman. He will also serve as a senior advisor to Fabian Garcia, Revlon's President and CEO, to ensure a successful integration and transition. The transaction has been unanimously approved by both Revlon's and Elizabeth Arden's Boards of Directors. Rhone Capital LLC, which holds approximately 14% of Elizabeth Arden's outstanding shares of common stock and 20% of Elizabeth Arden's voting interests, and Mr. Beattie, who holds approximately 4% of Elizabeth Arden's outstanding shares of common stock, have signed voting agreements in support of the transaction. Revlon and Elizabeth Arden expect the transaction, which is subject to approval by Elizabeth Arden's shareholders and regulatory clearances, as well as the satisfaction of customary closing conditions, to close by the end of 2016.
GUIDANCE
In recent quarters, Revlon has enjoyed top-line growth while maintaining a highly competitive Adjusted EBITDA margin and generating significant free cash flow. For 2016, on a standalone constant currency basis, without taking into account the pending acquisition, Revlon expects to generate net sales between $2.0 billion and $2.1 billion, implying a high single-digit growth rate, and between $400 million and $420 million in Adjusted EBITDA. For the 12 months ending December 31, 2016, the combined company would be expected to have annualized net sales of approximately $3 billion. Assuming full realization of approximately $140 million of expected multi-year synergies and cost reductions, Adjusted EBITDA for the combined company would be approximately $560 million.
ADVISORS
Moelis & Company served as lead financial advisor to Revlon. BofA Merrill Lynch and Citi also served as financial advisors to Revlon. Milbank, Tweed, Hadley & McCloy and Paul, Weiss, Rifkind, Wharton & Garrison LLP served as legal counsel to Revlon. Centerview Partners LLC served as financial advisor and Weil, Gotshal & Manges LLP served as legal counsel to Elizabeth Arden for the transaction.
