Cosmetics maker Revlon has had to hand out over $9.2 million over investors’ claims that they had been short-changed in a deal dating back to 2009.
The New York-based firm agreed to settle the class action, which had accused MacAndrews & Forbes Holdings of increasing its controlling stake in the company at the expense of minor shareholders in a tender offer made in 2009.
Court documents were filed this week in Delaware Chancery Court stating that several shareholders had sued MacAndrews & Forbes, its chairman and CEO Ronald Perelman, and the Revlon board.
According to the investors, they were deceived by Perelman et al into offering their shares at a derisory price right before Revlon reported strong results for its third quarter in 2009.
Perelman bought Revlon back in 1985, and has endured a bumpy ride with the cosmetics company; and this latest case will not have made it any better.
According to business law service Law360, the settlement class will cover all those who held Revlon shares between August 10 and October 8, 2009, the date the exchange offer closed, excluding certain institutional investors that settled separately
Meanwhile Revlon and Perelman continue to deny the allegations, maintaining that they "acted properly at all times" with respect to the tender offer, but entered into the settlement "in order to eliminate the burden and expense of further litigation and to put the settled claims to be released hereby to rest finally and forever," according to the memorandum.
At the same time, a deal has also been reached with a company shareholder filed in Delaware federal court over the Revlon’s alleged failure to disclose information about its upcoming financial results in the exchange offer.
Job cuts, dipping profits and previous settlements
It all adds up to a turbulent time for Revlon, as last month, it announced it will axe 250 jobs in the company in a bid to restructure its operations to improve operating efficiency.
Revlon’s second quarter results struggled under the weight of charges, currency translations and falling sales in Europe and Asia, although the Americas performance did help fend off bigger losses.
As a result Revlon announced actions to drive operating efficiencies, which will see it withdraw from some manufacturing facilities and cut its workforce.
It was also subject to another settlement earlier this year with Fidelity Management & Research, a company shareholder, in which it paid $19.9 million to resolve its claims over the share exchange.