NEW YORK--As expected, Procter & Gamble Co. has signed a deal to buy Giorgio Beverly Hills Inc. from Avon Products Inc. The purchase price, announced Tuesday along with other details of the agreement, is $150 million in cash, some $15 million less than Avon paid for Giorgio in 1987, when it acquired it from Fred Hayman and his partners. The $150 million price tag had been predicted by some analysts who had speculated that the acquisition of Giorgio would give P&G some badly needed heft for its fledgling prestige fragrance business in the U.S. For the last five years, Avon has been on a drive to shed noncore businesses, including Giorgio, which was put up for sale, then pulled off the block in 1990 after receiving what Avon considered insufficient bids. James E. Preston, Avon's chairman and chief executive officer, said in an interview Tuesday that the P&G bid was superior in two respects. First, it was all cash. Preston said past bidders had either wanted Avon to remain a partner in the business or had wanted to pay for Giorgio with a combination of cash and paper. Secondly, Preston said he is leaving Giorgio in good hands because P&G is a "brand builder" with a strategy to gain market share in the cosmetics business. Although Avon is taking a $22.2 million charge for a capital loss and the cost of fees related to the transaction (see related story, this page), Preston said Giorgio was a valuable asset. He asserted that during the seven years of ownership, Giorgio "generated a profit every year and a positive cash flow." "We think this is a very fair price and our investment bankers have assured us this is a very fair price," he continued. "We would have liked the optimum price, but the market is the market. This is not the go-go Eighties." As for P&G, Edwin L. Artzt, chairman and ceo, said in a statement, "Our objective is to be a worldwide leader in fragrances. The addition of the Giorgio brands to our line is an important step toward that goal." Artzt, who has been the force behind P&G's expansion into cosmetics and fragrances in recent years, noted, "Giorgio has a strong prestige fragrance business in the U.S. and a developing one in Europe, which nicely complements P&G's growing U.S. and well-established European business." Artzt was referring to Eurocos Cosmetic GmbH, based on the outskirts of Frankfurt. Eurocos, which has an American subsidiary, markets prestige fragrances by Hugo Boss, Laura Biagiotti and Otto Kern. Eurocos recently added the Salvatore Ferragamo license and plans to launch a women's fragrance in 1995. Eurocos was acquired in 1991, when P&G bought Ellen Betrix, a German mass market cosmetics brand, and Max Factor from Revlon. P&G had purchased Noxell in 1989 with its Cover Girl brand, the leading color cosmetics line in the U.S. mass market. "We've been very pleased with the progress of our prestige fragrance business in Europe," Artzt's statement continued. "We've doubled its size there since the acquisition in 1991. Now Giorgio gives us a significantly stronger foothold in the U.S. prestige fragrance business." Linda LoRe, who has headed Giorgio for three years, said Tuesday that she will continue as president and ceo, reporting to P&G's fine fragrance division in London. That unit also oversees Eurocos. Giorgio, based in Santa Monica, Calif., is now shipping its newest fragrance, Wings for Men. It will be launched in September and October in more than 1,200 doors. Other Giorgio fragrances include Wings for women, Red for women and men and the signature Giorgio scents. Avon said Giorgio did $165 million in wholesale volume in 1993. Eurocos also posted a wholesale volume of $165 million during P&G's last fiscal year, which ended June 30, according to the company. Acquiring Giorgio will boost P&G's prestige and mass market fragrance volume to $500 million, the company said. LoRe praised Preston for the support he had given Giorgio. But she said she is looking forward to joining P&G, where "there is a different focus." "With P&G," she said, "the whole point is that the company is serious about getting into the business and backing the brand."
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