(REV) to Acquire Elizabeth Arden (RDEN) in an All-Cash Deal Valued at an $870 Million Enterprise Value

JUNE 16, 2016

On June 16, Revlon announced that it had signed a definitive agreement to acquire Elizabeth Arden for $14 per share in cash, or a 50% premium over today’s $9.30 closing price. The deal represents an $870 million enterprise value. The combination of Revlon’s partnerships with major vendors and manufacturers and the elimination of duplicate activities is expected to allow for cost synergies of $140 million. The combined business is expected to generate a total of $3 billion in sales, and Revlon expects to generate about $2–$2.1 billion in revenues in 2016. The existing Revlon business is expected to grow at a high-single-digit rate. Revlon is a global beauty company that has a portfolio of consumer brands in cosmetics, haircare and skincare in 130 countries. Elizabeth Arden is a prestige global beauty company. Its businesses include Elizabeth Arden–branded skincare, color and fragrance products; various fragrances lines for celebrities; and fashion brands. Elizabeth Arden’s footprint extends to 120 countries. The companies expect to achieve three strategic synergies from the merger: • Expanded category mix: The acquired Elizabeth Arden–branded skincare line and the company’s portfolio of prestige fragrances are highly complementary to Revlon’s strength in color cosmetics, haircare and beauty tools. The acquisition will allow Revlon to tap into the prestige market segment and high-growth categories. • Diversified channels: Elizabeth Arden’s strong global distribution and travel retail channels will help Revlon diversify its current presence in the mass-market segment and at salons. • Bigger global footprint: Revlon is currently selling in 130 countries. With Elizabeth Arden’s presence in 120 countries, the combined business will cover key international growth regions such as the Asia-Pacific region. Scott Beattie, President and CEO of Elizabeth Arden, will join Revlon’s board of directors as non-executive Vice Chairman. Beattie commented that this is a compelling transaction that delivers certain value to shareholders, while recognizing the unique equity in the Elizabeth Arden brand, Revlon’s impressive fragrance portfolio and global footprint, and the positive momentum and growth potential of Revlon’s business. Revlon’s Elizabeth Arden acquisition is the latest in a long list of M&A activity in the global beauty industry in recent years. In 2015, there were 85 beauty-related acquisitions, according to the Fashion Institute of Technology. Companies such as Unilever, Procter & Gamble, L’Oréal and Macy’s have been actively seeking opportunities in color makeup and skincare. The table below outlines significant recent M&A activity in the beauty industry.

JUNE 16, 2016

Figure 1. Notable Recent Beauty Industry M&A Activity Date Event June 2016 Revlon announces intention to acquire Elizabeth Arden for an enterprise value of $870 million June 2016 Shiseido signs agreement with Gurwitch Products to buy the Laura Mercier and RéVive brands September 2015 Unilever buys Murad, a leading clinical skincare brand August 2015 Unilever acquires Dermalogica August 2015 Unilever acquires the leading independent prestige skincare brand, Kate Somerville July 2015 Walgreens Boots Alliance buys Avon’s Liz Earle for £140 million May 2015 Unilever closes acquisition of Ren February 2015 Macy’s offers to buy Bluemercury Spa and Beauty Chain for $210 million January 2015 Estée Lauder acquires skincare brand Glamglow and fragrance group Editions de Parfums Frédéric Malle November 2014 Estée Lauder offers to acquire leading sensory lifestyle brand Le Labo October 2014 Estée Lauder buys Rodin Olio Lusso, a luxury skincare and oils brand February 2014 L’Oréal acquires Shiseido’s Décleor and Carita brands for $312.93 million January 2014 Coty buys UK-based Lena White, the distributor of nail care brand OPI Source: Company reports/Fung Global Retail & Technology

JUNE 16, 2016

Deborah Weinswig, CPA Managing Director Fung Global Retail & Technology New York: 917.655.6790 Hong Kong: 852.6119.1779 China: 86.186.1420.3016 [email protected]

Jing Wang Research Associate

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