Consumer products giant Unilever Group on Thursday agreed to buy the personal care lines of Faberge--which include Elizabeth Arden, Brut and Aqua Net--for $1.55 billion. The agreement revives a similar deal between the companies that fell apart three months ago.
The proposed acquisition also would be the latest in a string of beauty product purchases by Unilever, a British-Dutch company that makes everything from Lipton Tea to Wisk detergent.
Earlier this month, Unilever's Chesebrough Pond subsidiary, which sells Prince Matchabelli products, agreed to buy Calvin Klein Cosmetics for $306 million. In June, Unilever agreed to acquire the European cosmetics businesses of the U.S. company Schering-Plough Corp. for $120 million.
"It's a good acquisition for them," said analyst Jay H. Freedman of Kidder, Peabody & Co, of Unilever's bid for Faberge. Unilever, he said, is "one of the global leaders in the personal-care business and they are looking to fill out their product line."
New York-based Faberge, which is controlled by the wealthy Riklis family, sells a wide variety of personal-care and beauty products. Its lower-priced and well-known lines, such as Brut cologne and Aqua Net hair spray, are sold mostly in drugstores and supermarkets. The pricey Elizabeth Arden lines of lotions and fragrances--which include Lagerfeld and Chloe--are found mostly in department stores and boutiques.
Attracted to Arden Unit
The Riklis family bought Faberge for $180 million in 1984 and later purchased Elizabeth Arden from the drug maker Eli Lilly & Co. for about $700 million in 1987. Combined profits of Faberge and Elizabeth Arden were $93 million on sales of $800 million in the fiscal year that ended in January.
Analysts say Unilever was probably most attracted to Faberge's Elizabeth Arden unit. Sales of "prestige" beauty products such as Arden have been growing at a rate of 8% to 10% annually, compared to flat sales for cosmetics overall. "It's one of the fastest-growing segments," Freedman said.
The sale of Faberge does not include its McGregor Apparel Group, which includes the Botany 500 and Wonderknit labels.
The new agreement between Faberge and Unilever was almost identical to the one announced by the two companies in February. But two months later, Unilever said it was scrapping the deal because the Riklis group was calling for changes that would have boosted the price. Both groups said the differences were minor and have been resolved in the most recent agreement.
The cosmetics and beauty products industry has seen the rise of huge beauty product companies as a result of numerous takeovers and acquisitions in recent years. In one major deal, Revlon purchased Max Factor in 1986.
'Very Difficult' Industry
Santa Barbara-based beauty and cosmetics consultant Suzanne Grayson said the industry went through a similar wave of mergers and acquisitions in the late 1970s and early 1980s when pharmaceutical companies picked off cosmetics firms. But the drug companies later sold off their beauty divisions after the growth in profits and sales fell below expectations, Grayson said.
"It's really very, very difficult," Grayson said of the highly competitive industry. "It looks like it will be wonderful before you get into it. I don't know why anyone would want these companies."