Revlon ColorStay eye products.

One of Revlon Inc.’s minority shareholders has taken issue with chairman Ronald Perelman’s recent share buying spree.

Perelman, also the chairman and chief executive officer of MacAndrews and Forbes Inc., has spent the past few months quietly upping his ownership at Revlon, which now stands at 84.6 percent. But Mittleman Brothers Investment Management, which owns about 5.7 percent of Revlon, has voiced concern that Perelman will try to take the company over and squeeze out minority shareholders.

Mittleman has written two letters to Revlon’s board about the matter, urging board members to protect minority shareholders from “risk.” The firm suggested Revlon adopt a poison pill in favor of minority shareholders and Perelman agree to limit his ownership to less than the 90 percent for the next five years — so that minority shareholders can reap the potential benefits from the Revlon-Elizabeth Arden merger executed in 2016.

In its letter, Mittleman stated concern that Perelman’s stock purchases could be an effort to execute a short-form merger, which could be done if Perelman were to own 90 percent of the business.

In a response to Mittleman’s first letter, MacAndrews clarified that it doesn’t intend to increase its position in Revlon to more than 89 percent, and that there are no plans to take Revlon private. MacAndrews and the board agreed not to take over the company for one year as of Sept. 15, but Mittleman took issue with that solution in a second letter to Revlon’s board, dated Oct. 17.

MacAndrews and Forbes wrote:

Ron Perelman  Jim Smeal/BEI/BEI/Shutterstock

“Should MacAndrews & Forbes determine to undertake transactions to increase its beneficial ownership above 89 percent of the issued and outstanding common stock or to take Revlon private, MacAndrews & Forbes agrees to: (1) notify the board at least five business days in advance of such transactions; and, prior to consummating such transactions, (2) convene a board meeting; (3) support the creation of a special committee of independent directors empowered to select its own advisors; and (4) negotiate with that special committee regarding the terms of such transactions by MacAndrews & Forbes, in order to promote the interests of all shareholders, including minority shareholders.”

Mittleman responded:

We “believe that the fractional accommodation…made by Mr. Perelman in response to our request for a justified increase in minority shareholder protection is clearly inadequate,” Chris Mittleman, chief investment officer of the firm wrote.

One year isn’t enough, the firm contends, because it limits Mittleman’s ability to reap the benefits of Revlon’s Arden acquisition. “Minority shareholders should be entitled to enjoy at least a couple of years of those expected incremental free cash flows once the associated costs are finished in 2020,” Mittleman wrote. Revlon chief executive officer Fabian Garcia said in January that over the next five years, he wants to grow Revlon into a $5 billion business, and Mittleman said that “prospective return that we as shareholders would rather not miss.”

A spokesman for Perelman and MacAndrews and Forbes declined to comment on Perelman’s motives surrounding the stock purchases.

“To be clear, we have no evidence whatsoever that any such plan to squeeze out minority shareholders by Mr. Perelman is in progress or even being contemplated, but a simple Google search using the terms ‘Ron Perelman minority shareholders’ reveals a history of sporadic prior actions by Mr. Perelman that appear to have been at odds with minority shareholder interests at various Perelman-controlled companies over the past 25 years or so, including with Revlon itself in 2009,” Mittleman wrote.

The firm is referring to Perelman’s attempt to buy out minority shareholders in 2009 to take Revlon private. That deal failed and spurred a lawsuit with the SEC, which charged the company with violating federal securities laws and misleading shareholders during the process. In 2013, Revlon agreed to pay an $850,000 fine.

Take-private rumors also swirled in early 2016 when MacAndrews & Forbes said it would explore “strategic alternatives” for Revlon — a statement that can sometimes mean sale. But later in the year, Revlon said it would take over Elizabeth Arden, and in 2017, reorganized itself into three new business segments under Garcia. Garcia’s vision for the business includes getting to $5 billion in sales by 2022 — for fiscal year 2016, Revlon posted $2.3 billion in net sales.

Perelman’s recent share purchases come as Revlon’s stock price has sagged — it hovered at $21.65 midday Monday.

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