A wholly-owned subsidiary of Revlon Inc (NYSE:REV) called Revlon Escrow Corporation is in the process of raising funds through the sale of bonds. Those bonds are in the form of senior unsecured notes that will mature in 2024.
The sale of the notes by Revlon’s subsidiary is expected to generated $400 million in gross proceeds. Moody’s Investors Service has given its take on the debt fundraiser by assigning a B3 rating on the unsecured notes being offered by the subsidiary. According to Moody’s, the B3 rating of the notes is inspired by the stable outlook for Revlon.
Raising financing for acquisition
The $400 million being raised will go toward the acquisition of Elizabeth Arden, Inc. (NASDAQ:RDEN).
Revlon has agreed to acquire Elizabeth for $14 a share, which reflects a premium of 50% over the market price.
The combination of Revlon and Elizabeth is expected to result in a business entity with about $3 billion in annual revenue. The deal will also provide an opportunity for Revlon to expand into categories such as perfume and skincare.
Revlon hopes to close the acquisition before the end of this year.
$2.6 billion in financing
In all, Revlon is seeking $2.6 billion in financing and it has won the commitment of lenders such as Bank of America Corp (NYSE:BAC) and Citigroup Inc (NYSE:C) to back the fundraiser. In addition to using the money raised to fund the acquisition of Elizabeth, the company also intends to use a portion of the money to retire about $1.8 billion in long-term debt, thereby paying off old debt with new debt at lower rates.
Cost-saving opportunity
Not only is Revlon looking for a boost in sales and expansion of its geographic coverage, but the company is also hoping to save $140 million following the acquisition of Elizabeth. The savings target is expected to be achieved within 3 to 5 years after closing the deal.
Revlon reported preliminary results for the June quarter with sales in that period rising 1.5% to about $489 million. The actual reporting of the results will be on July 29.
