Faberge Inc. said Friday that it has agreed to sell its beauty products and toiletries businesses--which include the Elizabeth Arden, Brut and Aqua Net lines--to international consumer products giant Unilever Group for $1.55 billion in cash.
The deal is another in a long line of acquisitions in the cosmetics industry and one that would give Unilever, a British-Dutch company, a much greater presence in the United States. It also would boost the size of Unilever's personal products business by more than 25%.
"Unilever has for years planned on becoming more important in the U.S.," said Suzanne Grayson, a cosmetics and toiletries industry consultant. "They have not been able to do it on their own. So, they have gone about buying companies."
In 1986, Unilever acquired such well-known American brands as Prince Matchabelli fragrances and Vaseline when it bought Westport, Conn.-based Chesebrough-Pond's for $3.1 billion. Unilever, with worldwide sales of more than $30 billion, also makes such products as Lipton teas, Wisk detergent and Lifebuoy soaps.
Analysts said $1.55 billion is a high price for the cosmetics and toiletries divisions of Faberge, which is owned by New York financier Meshulam Riklis. When word of negotiations between the two parties leaked out last month, some industry analysts estimated that the divisions would fetch $1 billion.
"They are are probably overpaying," said Grayson, "but it's going to be worth it in the long run."
Doing 'Very, Very Well'
Under Riklis' ownership, New York-based Faberge has become one of the world's largest cosmetics and beauty products companies. Elizabeth Arden, which was acquired in 1987, and Faberge reported combined sales of $800 million and operating profit of more than $100 million for the fiscal year ending last month.
"They have been doing very, very well," said Paul Cohen, publisher of Beauty Age, a trade publication. "They also have increased the volume of spending on the brands, which has helped each one of the brands strengthen their position in the marketplace."
Cohen said Faberge's chairman, Daniel Manella, deserves much of the credit for boosting profitability and sales at Faberge. Manella, reached at his weekend home in Palm Beach, Fla., said he will continue working for the Riklis family, as he has for the past 33 years.
Manella boosted profit at Faberge mostly by reducing costs, analysts said. After acquiring Elizabeth Arden, Faberge moved quickly to meld overlapping operations worldwide.
"We consolidated factories, offices and warehouses all over the world, and we did it really quickly," said Manella, who added that Arden's operating profit more than doubled within a year after Faberge took over.
Faberge products are divided into roughly two large categories: low-priced goods, such as Brut cologne and Aqua Net hair spray, sold primarily at mass merchandisers and supermarkets; and higher-priced Elizabeth Arden fine fragrances and cosmetics sold in department stores.
Faberge will retain the McGregor Apparel Group, which includes clothing lines such as Botany 500, Wonderknit and Billy the Kid.
Keep Building Image
Manella said there never were any plans to sell Faberge but that the Unilever offer "was something that had to be explored. They are getting a bargain. The company will appreciate in value in by several hundred million."
"This is the best thing that has ever happened to Arden," said Grayson, maintaining that Unilever has the money needed to continue building the brand's sales and image. Arden has "not been able to get a younger image," she said. "It's a tough business and everybody in the industry is working hard and the competition is terrific."
In a prepared statement, Unilever said: "The Faberge and Elizabeth Arden businesses provide an excellent fit with Unilever's existing personal products operations worldwide. Elizabeth Arden's portfolio of brands will provide Unilever with a global presence in the prestige segment of the skin care and color cosmetics markets."
Industry analysts said the acquisition is one of many in recent years that have reduced the number of players in the slow-growing and highly competitive U.S. cosmetics industry. In one of the biggest previous deals, Revlon purchased Max Factor in 1986 for $345 million.
"The total industry is in the mature phase of the life cycle," said Cohen at Beauty Age. "It is normal for to go through a lot of consolidation."