Revlon jumps after majority shareholder Perelman says won't take private
Shares of personal care products maker Revlon (REV) are up over 6% in afternoon trading after holding company MacAndrews & Forbes wrote a letter to the Revlon board with reference to a prior filing from the Mittleman Brothers dated August 22. MacAndrews & Forbes is wholly owned by its CEO Ronald Perelman. Perelman is also the chairman of Revlon and its largest shareholder. "MacAndrews & Forbes' primary objective is to build, run, and grow great businesses," according to a statement on its website. MITTLEMAN LETTER: On August 22, Mittleman Brothers, an investment advisor based in New York, disclosed in a regulatory filing, that it had a 5.4% stake in Revlon and that it had sent a letter to the Revlon CEO Fabian Garcia and the company board. The Mittleman's letter explained how their investment strategy concerning the stake is "to hold a stake for years to come as we believe that the shares are severely undervalued and that the current weakness in North American consumer sales will prove transitory, with continuing strong growth in international sales." The Mittleman Brothers expressed their satisfaction with the appointment of Fabian Garcia to the CEO role in 2016. In the letter, the Mittlemans go on to express their concern, "about the board's preparedness and willingness to protect minority shareholders in light of the recent increase in the percentage ownership of Revlon's controlling shareholder, MacAndrews & Forbes [Ron Perelman]." The Mittlemans want to cap Perelman at 90% ownership, for now, to protect minority shareholders from a "creeping tender offer" by Perelman that would "squeeze out minority shareholders for inadequate consideration... If open market purchases by Perelman continue during this period of low prices until the 90% ownership threshold is attained, a short-form merger under Delaware law may be attempted thereby depriving minority shareholders of fair value with little recourse except for the lengthy and expensive process of perfecting appraisal rights." PERELMAN'S RESPONSE: In his response letter to the Revlon board, Perelman, through his general counsel, said that his firm MacAndrews & Forbes does not intend to increase its beneficial ownership of common stock above 89% or to undertake transactions to take Revlon private. Perelman, in the letter, assured the board that if the firm decides to initiate any actions it will let the board know in advance to give them a chance to review the transaction "in order to promote the interests of all shareholders, including minority shareholders." PRICE ACTION: Shares of Revlon are up almost 7% in afternoon trading to $17.10 per share.