Unilever to sell Elizabeth Arden to FFI Fragrances for $225 million

As part of its Path to Growth Strategy, unveiled in February 2000, Unilever announced it would re-organise or divest businesses that failed to meet its strategic requirements. 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, colour and skin care brands and the White Shoulders brand. In addition, FFI will acquire the licence 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.”

Unilever will receive $190 million (€226 million approx) in cash and the balance in FFI convertible preferred stock. The FFI convertible preferred stock has a face value of $50 million (€60 million approx) to which Unilever ascribes a value of approximately $35 million (€42 million approx).

Net assets being sold have a book value of $95 million (€113 million approx). The cash inflow, after tax, on disposal will be $160 million (€190 million approx).

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 (€940 million approx) after including the goodwill write back of $830 million (€988 million approx). However, the impact on the balance sheet will be to increase overall shareholder equity by some $40 million (€48 million approx).

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

Note to Editors: ? The total 1999 sales of the business being disposed of was approximately $550 million (€655 million approx) and operating profit, after allocation of overheads, $18 million (€21 million approx).

? Brands involved in the sale to FFI Fragrances are:

Elizabeth Arden, Red Door, 5th Avenue, Green Tea, Splendor, Sunflowers and White Shoulders; the skin care brands Ceramides, Millennium and Visible Difference and the Elizabeth Arden cosmetics line. In addition, FFI will acquire the licence to Elizabeth Taylor’s White Diamonds and the Passion fragrance brands.

? FFI Fragrances (formerly French Fragrances, Inc) was established in 1992 and is based at Miami Lakes, Florida. It has a portfolio of some 230 fragrances and annual sales in excess of $360 million.