The US cosmetics company Revlon has agreed to buy Elizabeth Arden in an $870m (£611m) deal, which will bring together Revlon’s hair colour products with its rival’s anti-ageing creams and celebrity fragrances.
The move will create a cosmetics giant with annual sales of $3bn. It comes less than six months after Revlon’s main shareholder and chairman, the billionaire Ron Perelman, considered putting the company up for sale. The New York-based firm has been struggling under its heavy borrowings and the deal will help it refinance the debt.
Fabian Garcia, previously Colgate-Palmolive’s chief operating officer, was brought in as Revlon’s new chief executive in March, replacing Lorenzo Delpani, who stepped down citing personal reasons. Garcia said Elizabeth Arden was “one of the last independent iconic brands in the cosmetics industry”.
Elizabeth Arden is known for its luxury skincare products, especially anti-ageing ranges, such as Prevage, Ceramide and SuperStart. Its fragrances include those licensed from celebrities including Britney Spears, Justin Bieber and Taylor Swift. However, the popularity of celebrity fragrances has waned, with sales falling over the past year, while Elizabeth Arden’s namesake brand has been performing much better.
Revlon is stronger in hair colour and colour cosmetics, which are sold through mass retail channels and beauty salons in 130 countries. The acquisition will expand the firm’s presence around the world, after it pulled out of China about two years ago.
The beauty market has been tough: the pair are up against New York-based Estée Lauder, which is controlled by the Lauder family and recently announced 1,200 job cuts, and Paris-based L’Oréal, the world’s largest cosmetics company, which is part-owned by by the Bettencourt family and Nestlé.
The equity value of the deal is $419m, with the rest made up by debt. Revlon said (pdf) it would pay $14 a share for Elizabeth Arden, a 50% premium to Thursday’s closing share price. Bank of America Merrill Lynch and Citigroup have committed $2.6bn to fund the deal and refinance the debt of the two cosmetics makers.
The deal is expected to generate $140m of savings by removing overlap, integrating the manufacturing and distribution networks of both companies and giving them greater purchasing power. They hope it will close by the end of December.
Revlon was founded in 1932 by Charles Revson, his brother Joseph and a chemist, Charles Lachman, who contributed the L in the Revlon name. In the midst of the Great Depression, they started with a single product, a nail polish. Using a blended pigment formula, it was the first opaque nail enamel – at a time when the only shades available were pale and sheer.
Called Cherries in the Snow, it was inspired by the scarlet-lipped, cigarette-smoking Hollywood actors of their day and is still selling today. Revlon’s other nail polishes had names such as Fatal Apple and Kissing Pink. Lipstick became the firm’s next big item in 1940 after Charles Revson noticed a woman in a restaurant whose lips and nail polish did not match. The company then launched an advertising campaign touting “matching lips and fingertips”.
Elizabeth Arden dates to 1910 when the eponymous founder opened her first spa on Fifth Avenue – at a time when it was rare for women to wear makeup, much less run their own businesses.
An advocate for women’s rights, she once marched with 15,000 fellow suffragettes wearing red lipstick as a symbol of strength and developed cosmetics for women serving in the military during the second world war.
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