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Elizabeth Arden Being Eyed by LG

Shares of Arden climb on possible takeover rumblings.

Shares of Elizabeth Arden Inc. jumped 11.9 percent Wednesday after the disclosure that it is the target of a possible acquisition offer from South Korea’s LG Household & Healthcare Ltd.

This story first appeared in the April 24, 2014 issue of WWD.  Subscribe Today.

Arden is one of several possible acquisition candidates that LG has targeted.

An Arden spokeswoman said Wednesday, “We cannot comment on rumors.” A spokeswoman for LG said, “Elizabeth Arden is one of the companies being reviewed by our company as a possible target but, at this point of time, there is nothing definitive we can comment on.”

Seoul-based LG owns the Korean beauty brands Whoo and O Hui. In 2010, it acquired Korean brand The Face Shop for $363 million. In 2012, LG acquired Japanese brand Everlife for $307 million. It also has a joint venture with Coty Inc. to sell Coty’s Philosophy skin-care line in Asia.

Shares of Arden closed at $31.83, giving it a market capitalization of roughly $931.6 million.

The company in February posted second-quarter results in which net income fell to $35 million, or $1.16 a diluted share, from $44.8 million, or $1.47, in the prior-year period. Net sales for the period declined to $418.1 million from $467.9 million. The fragrance business in the U.S. was one of the weaker components of its overall business, as was its international fragrance business in Europe.

In addition to its core Arden brand, the firm has fragrance licenses for True Religion, BCBG Max Azria, Nicki Minaj and Justin Bieber.

B. Riley senior analyst Linda Bolton Weiser said, “We have said that we believe Arden could be a take-out candidate, because of Arden’s coveted Elizabeth Arden prestige beauty franchise and the inconsistent execution over the years, which has resulted in a chronically low valuation for the stock.” She added, “We get the sense that, given the vast margin improvement that Arden could theoretically still make in the future even as a stand-alone company, Arden’s board might be reluctant to sell unless the valuation is quite high.”

Weiser is one of several analysts who speculated that they thought Coty Inc. could be interested in Arden as well. So far Coty has not publicly expressed any interest in Arden.