Elizabeth Arden Chatter May Be More Than Just Rumors
Shares of Elizabeth Arden (NASDAQ: RDEN) continued to trade higher on Thursday following news reports that the company has enlisted the services of Goldman Sachs bankers to explore a sale of the company.
Bloomberg reported on Wednesday that a South Korean cosmetics and beverages company called LG Household & Health Care is considering a bid to acquire Elizabeth Arden, the popular fragrance maker best known for its celebrity-branded scents such as Justin Bieber, Mariah Carey and Britney Spears.
The South Korean-based company is on the shopping block to acquire a local or international firm as part of its strategy to become a global luxury beauty company.
Linda Bolton Weiser of B. Riley & Co on Thursday released a research note explaining that that Elizabeth Arden was previously believed to be a suitable take-out candidate as the company has struggled over the years, which has resulted in a low valuation for the stock.
However, despite a lower stock price, the company has continued to maintain the international prestige of its brand name
“We get the sense that, given the vast margin improvement that Elizabeth Arden could theoretically still make in the future even as a stand-alone company, Elizabeth Arden's board might be reluctant to sell unless the valuation is quite high,” she explained.
Benzinga reached out to Bolton Weiser to further discuss the topic.
Bolton Weiser affirmed the development is more than just market chatter. She pointed to the aforementioned Bloomberg article that included a comment from an LG Household spokesperson that the company is ready to do "big deals” to boost its international profile.
According to Bolton Weiser, Coty (NYSE: COTY) could also prove to be interested in acquiring Elizabeth Arden given the fact that the France-based beauty product manufacturer does not have a “prestige skin care brand” in its existing portfolio.
Inter Parfums (NASDAQ: IPAR) could show interest in only Elizabeth Arden's fragrance unit, according to Bolton Weiser.
Procter & Gamble (NYSE: PG) does not have a “prestige skin care brand,” according to Bolton Weiser but the company is currently in a divestiture mode, and not a buying mode so any bid from the Dow component is unlikely.
Other consumer names like Unilever, Colgate-Palmolive and Loreal are also unlikely to be interested in any potential deal.
Shares are Neutral rated with a $26 price target.
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