CL Colgate Palmolive Co

By Sharon Terlep 

Revlon Inc. agreed to buy rival Elizabeth Arden Inc. on Thursday, months after Revlon's largest shareholder contemplated putting the cosmetics company up for sale itself.

The $420 million all-cash deal will expand Revlon's presence in categories such as skin care and perfume and give it a broader geographic footprint, creating a company with combined annual sales of roughly $3 billion. The deal also will help Revlon refinance its heavy debt load.

Both businesses 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.

It comes six months after controlling shareholder and Chairman Ronald O. Perelman disclosed he was exploring strategic alternatives for Revlon. Since then, Revlon's former CEO Lorenzo Delpani stepped down and in March, the cosmetics giant brought in Fabian Garcia, an outsider who was chief operating officer at Colgate-Palmolive Co. It also bought some smaller businesses from Coty Inc.'s Cutex business.

Elizabeth Arden is "one of the last independent iconic brands in the cosmetics industry," Mr. Garcia said. The company says the deal is expected to close by the end of 2016.

Revlon said it would pay $14 a share for Elizabeth Arden, a 50% premium to the company's closing stock price. The company will use $2.6 billion of new financing commitments from BofA Merrill Lynch and Citigroup to fund the purchase and to refinance Arden's existing debt, as well as much of Revlon's $1.8 billion in long-term debt.

Shares of Revlon, which have risen 11% this year, are down 15% from a year ago. The stock nudged slightly higher in after-hours trading to $31.30. Elizabeth Arden's sales jumped 50% on the news to just below the $14 offer price, but are down 31% from a year ago.

Revlon said it expects the deal to produce $140 million in savings over three to five years. Revlon forecast its 2016 sales to be between $2 billion and $2.1 billion, excluding the acquisition and impact of currency fluctuations.

Elizabeth Arden, which was founded in 1910 in New York, sells perfumes and cosmetics under its own brand, as well as making fragrances for a roster of celebrity trademarks such as Justin Bieber, Mariah Carey and Taylor Swift. The company's sales have weakened in recent years and it hasn't produced an annual profit since 2013.

The deal price is roughly half of what Elizabeth Arden nearly sold for two years ago when it was trading close to $30 a share.

Write to Sharon Terlep at sharon.terlep@wsj.com

(END) Dow Jones Newswires

June 17, 2016 02:48 ET (06:48 GMT)

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