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Elizabeth Arden mulls tender offer from private equity investors

By Simon Pitman+

28-Aug-2014
Last updated on 28-Aug-2014 at 15:45 GMT

Elizabeth Arden mulls tender offer from private equity investors

Troubled fragrance and luxury cosmetics player Elizabeth Arden is contemplating a tender offer from the affiliates of private equity investor Rhône Capital.

The tender has been made by Nightingale Onshore Holdings and Nightingale Offshore Holdings offering to acquire up to 6.4 million shares of the company’s outstanding stock, which constitutes approximately 20% of all the outstanding shares.

The private equity investors made the offer at $17.00 per share at the beginning of the week, which would put the total offer as high as $109 million.

Speculation drives up share price

Speculation over the proposed deal has already had a positive effect on the company’s share prices, which hit a peak of $18.35 a share when the offer was revealed yesterday, having started the day at $17.31 a share.

Earlier this month Rhône bought 7.6% of the outstanding common shares in Elizabeth Arden’s stock, at the same time as signing a standstill agreement that it would not purchase more than a 30% share in the common stock.

The company’s board of directors said that it was in consultation with the company management and financial and legal advisors over the current offer from the Rhône affiliates and plans to advise company shareholders about its position within the next ten business days.

Elizabeth Arden results continues bad run

Elizabeth Arden’s fourth quarter results, for the most recent quarter ending in June showed a 28.4% decline as some of its biggest celebrity fragrance brands failed to make the mark.

Net sales for the three months ending June 30th fell to $191.7m, compared to a figure of $201.2m in the corresponding period last year, a decrease of 24.8% when factoring in the negative impact of currency translations.

The company said it had expected weaker sales because of a low level of fragrance launches, but the forecast was exacerbated due to lower celebrity fragrance sales, specifically its top-selling Justin Bieber and Taylor Swift brands.

Inventory destocking also continued to impact the performance, as it had in the third quarter, while measures to tighten global distribution of Elizabeth Arden branded products and key fragrances.

Outlook

The company says that looking ahead to the 2015 financial year the business will be focused on stabilization and rebuilding profitability, although the first quarter of the year is expected to be challenging.

Beyond that first quarter, the performance is expected to pick up in the second half of the year, when net sales are expected to increase compared to the corresponding period as new product launches come through and the benefits of improved pricing are felt.

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