Perfumania Holdings Inc. cut a roughly $170 million deal to acquire Parlux Fragrances Inc., which has a portfolio of celebrity and designer scents — including Rihanna and Nicole Miller — and is one of the discount beauty retailer’s biggest suppliers.
The two firms have been in talks since August and Parlux has 30 days to solicit other interested parties.
“The combination of Perfumania and Parlux is a major step toward building a more significant and financially stronger designer fragrance and beauty products company,” said Mike Katz, Perfumania’s president and chief executive officer.
And Fred Purches, Parlux’s chairman and ceo, said the combined company would be “well positioned to deliver long-term value to stockholders and a broader range of product to its valued customers.”
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If all goes according to plan, the deal will close in the first half of next year and Parlux shareholders will receive, for each share they hold, either $4 in cash plus one-fifth of a Perfumania share or just over one-half of a Perfumania share. Certain adjustments to the formula could be made.
The deal values Parlux stock between $7.91 and $8.55 and the company’s shareholders offered their hearty approval, bidding the stock up 95 percent to $6.75 in after-hours trading Friday. Perfumania, which will bear the risks associated with the combined company, saw its stock fall 9.8 percent to $17.78.
The Nussdorf family, which controls about 82 percent of Perfumania’s stock and 11 percent of Parlux’s shares, is expected to retain a majority of the retailer’s stock following the deal.
The Nussdorfs are providing $30 million of funding for the deal, which will also be financed by up to $43 million from the firm’s senior secured credit facility.
Perfumania could pay up to $61.9 million to complete the merger, or issue as many as 5.9 million shares.
What it gets is a company on the upswing.
Parlux has seen its fortunes on the rise this year, both in terms of improved product assortment and financial results. The company positioned its new Rihanna franchise as its third sales pillar between Paris Hilton and Jessica Simpson, previously Parlux’s two powers.
The Fort Lauderdale, Fla.-based fragrance manufacturer launched the first Rihanna fragrance, called Reb’l Fleur, on Jan. 25 in 500 Macy’s doors and the fragrance scored a sales ranking in the top 10 of Macy’s women’s fragrances. Industry sources calculated that the debut scent could rack up $80 million in retail sales for this full calendar year.
When it came time to launch a follow up fragrance, simply called Rebelle by Rihanna, early this month, industry sources speculated that the second scent could rack up 70 percent of the retail volume that had been done by the first fragrance, or $56 million at retail and $33.6 million at wholesale.
Parlux took a hit in its first fiscal quarter, posting losses as it invested in advertising to support the rollout of the Rihanna launch.
That changed in the second fiscal quarter, ended Sept. 30, when the firm came roaring back. Net income increased threefold to $3.3 million, or 16 cents a share, from $1.1 million, or 5 cents, a year earlier. Sales for the three months ended Sept. 30 rose 19.3 percent to $46 million from $38.6 million. Gross margins rose to 55 percent from 50 percent as sales to U.S. department stores increased. The company stated on Nov. 3 that it was on target to end the fiscal year next April 2012 with a sales volume in the range of $145 million to $150 million.