Unilever to Sell Ardent to FFI for $225 Million

Unilever today announced it has signed a definitive agreement to sell its Elizabeth Arden business, brands and certain assets to FFI Fragrances, a leading manufacturer and marketer of prestige fragrance brands based in Miami Lakes, Florida for a consideration of approximately $225 million. The transaction, subject to customary conditions including regulatory approvals, is expected to be completed around year-end.

As part of its Path to Growth Strategy, unveiled in February 2000, Unilever announced it would re-organize or divest businesses that failed to meet its performance standards. It identified specifically Elizabeth Arden and the European Bakery Supplies Business (EBSB). Earlier this month Unilever completed the sale of EBSB.

Included in the sale to FFI are the Elizabeth Arden fragrances, color and skin care brands and the White Shoulders brand. In addition, FFI will acquire the license to Elizabeth Taylor’s White Diamonds and Passion fragrance brands. The sale also includes related Elizabeth Arden offices and a distribution facility. In total, some 1500 employees are expected to transfer to FFI.

Unilever will retain its Prestige designer fragrance brands – Cerruti, Lagerfeld, Chloe and Valentino – which will become part of its Unilever Cosmetics International (UCI) business. UCI already manages Calvin Klein Cosmetics, Nautica and the forthcoming Vera Wang and BCBG fragrance brands.

Charles Strauss, Unilever board director responsible for its global prestige business, said: “Although Elizabeth Arden has improved over the last couple of years, we feel that it can be best developed outside our business. This move fits with our Path to Growth strategy by allowing us to focus on a core group of designer fragrance brands.

“By bringing these designer fragrance brands together within UCI we will deliver faster product innovation and global brand development to build a stronger Prestige fragrance business,” said Mr Strauss.

Under terms of the agreement, Unilever will receive $190 million in cash and the balance in FFI convertible preferred stock. The FFI convertible preferred stock has a face value of $50 million to which Unilever ascribes a value of approximately $35 million. Net assets being sold have a book value of $95 million. The cash inflow, after tax, on disposal will be $160 million.

When Unilever acquired Elizabeth Arden in 1989, the treatment of goodwill was to charge it directly to reserves. As a result of changes in accounting standards, it is now necessary for any goodwill associated with such an acquisition to be charged in full to the profit and loss account on disposal. Consequently there will be a reported loss after tax on disposal, taken as an exceptional item, of $790 million after including the goodwill write back of $830 million. However, the impact on the balance sheet will be to increase overall shareholder equity by some $40 million.

These amounts, which will be included in Unilever’s fourth quarter results, fall within the restructuring charges of (Euro) 5 billion announced in February as part of Unilever’s Path to Growth Strategy.