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Korean giant LG closes door on Elizabeth Arden bidding process

By Simon Pitman+

01-Jul-2014
Last updated the 30-Jun-2014 at 15:35 GMT

Korean consumer goods giant LG Household and Health Care has said it is no longer interested in bidding for Elizabeth Arden, after the cosmetics player revealed its restructuring plan.

In an official statement that followed Elizabeth Arden’s announcement on restructuring, LG H&H said it would be searching for other merger and acquisition opportunities, but did not make any further details available.

LG H&H, which is a part of the LG Group – one of the South Korea’s biggest multinational conglomerates, is also the country’s second largest cosmetics and personal care player, and had been eyeing the US-based Elizabeth Arden business as a means of expanding its global footprint.

LG H&H eyes international expansion

LG H&H, had first expressed interest in Elizabeth Arden back in April, following on from a period when it had expanded through the acquisition of a number of smaller local players, including TheFaceShop.

It has also purchased a number of other brands in the Asia Pacific region, including the Japanese brand, Everlife, as well as in North America, with the acquisition of Canadian retailer Fruits and Passion.

The bid for Elizabeth Arden would have put it in the running with a globally recognized luxury brand that has significant reach and some very high profile fragrance, colour cosmetic and skin care brands.

Weaker performance in the US underpins Elizabeth Arden results

According to a recent Reuters reports Elizabeth Arden has a market value of $845 million, but it has seen its sales hit by a much weaker-than-expected North American retail market as well as deep industry discounting in key European markets that have eroded profit margins.

The restructuring plan aims to cut costs in order to eliminate waste and create a leaner more efficient business structure, but the plan has also revealed a lot about weaknesses in the businesses, which has made execs at LG H&H think twice.

Elizabeth Arden’s share prices shot up after LG H&H had first made the announcement that it was interested in acquiring the US cosmetics players, but the share price made a significant dip last week, following news of the restructuring and an end to the bidding process.

As of mid-day, trading in Elizabeth Arden shares had fallen by nearly 18%, following the previous day’s announcements, to trade at $22.20 a share.

Elizabeth Arden restructuring points to leaner business

Last week the Elizabeth Arden board of directors also announced that it would be exiting low-return businesses and categories with the ultimate goal of improving the company’s bottom line and boosting profits.

Called the 2014 Performance Improvement Plan, the plan covers the exiting of certain areas of retail, together with a number of less lucrative fragrance license agreements, as well as changes in customer, distribution and supply chain relationships.

It will also target the discontinuation of certain unprofitable product lines, together with the closure of its affiliate in Puerto Rico.

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