Revlon mulls investor buy-out proposal

20-Apr-2009 - Last updated on 21-Apr-2009 at 16:14 GMT

Revlon’s board of directors is mulling a proposal by investment group MacAndrews & Forbes Holdings to buy-out shares it does not already own in the business.

The deal would serve to reduce the debt load for the struggling company, which is finding the going even more difficult following the economic downturn.

MacAndrew & Forbes already owns shares to the value of 75 percent of the total voting power at Revlon, and the current proposal is to buy up the remaining class A stock not currently held by the investor.

Shares sold for $75m

This proposal would see the shares sold for $75m which would be redeemed after four years, giving MacAndrew & Forbes total control of all the common stock in Revlon.

In exhange the investment company says it will write-off $75m of a $107m outstanding loan which was originally made to Revlon’s consumer products unit.

The $107m loan was oextended back in November 2008, when the company also announced that it wanted to launch an equity rights offering.

Deal releases much needed liquidity

The proposal would allow Revlon to release some much needed liquidity onto its balance sheet, as sales fall in the face of a severely challenging consumer retail market worldwide.

Back in February the company announced that during the all-important fourth quarter a strong dollar had a significant negative impact on its international sales, while poor sales of key brands hit results further.

The company said that sales for the quarter, which included the all-important holiday season, fell by 10.4 percent to $334.2m, down from $373.3m.

Poor result despite agressive marketing

These figures came despite a considered effort to increase the company’s marketing and advertising activities during the period, which in turn pushed up costs.

Although no firm forecasts for 2009 are being given, the company has said that the current strategy and focus ‘will generate profitable net sales growth and sustainable positive free cash flow’.

The recent performance of the business led Revlon to appoint its existing chief financial officer Alan Ennis to a position on the company’s board of directors where he will serve as president.

Ennis became president and director of the company on March 1, a role he will take on in addition to his existing duties as chief financial officer.