The Securities and Exchange Commission (SEC) slapped a charge of
$850,000 on Revlon (
) last week on account that it allegedly shortchanged its minority
shareholders when the company tried to go private in 2009. However,
the company had already provided for a contingency loss of $8.9
million in 2012 for the same deal and the modest fine of $850,000
was warmly greeted by the market.
Our Full Analysis for Revlon Stock
Billionaire Ronald O. Perelman owns nearly 77% of the company's
shares, up from 58% in 2009 when he in a failed attempt to take the
company private offered Revlon's minority shareholders preference
shares in the company in exchange for their common stock. The
common stock was then to be used in paying off a maturing debt,
which was issued by the company MacAndrews & Forbes, of which
Ronald O. Perelman is the Chairman and CEO.
The terms of the offer were not fair to the minority
shareholders as determined by a third party independent financial
advisor. Some of the investors had invested in its stock through
the company's 401(k) retirement plan, and the plan's trustee found
the offer to be unfair after the investigation was completed.
Revlon, however, made some arrangements to hide this investigation
from the individual retirement plan members, which was the crux of
class action lawsuit filed against Revlon. The SEC fined Revlon on
account of its misconduct and warned against indulging in any such
practices in the future.
Effect On Earnings
Revlon's recent settlement with the SEC is a one-time gain that
will impact the company's quarterly earnings as the excess of
provision would be added back to the company's net income. Revlon
reported a net income of about $188 million in 2012. The company
would report higher net earnings and earnings-per-share for this
quarter on account of this settlement. Our price estimate remains
the same as before since the recent settlement does not change any
fundamental drivers of the company.
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