REV - Revlon

[tombgrt]

I wish him GL with a poor buy-out offer considering Mittleman has 4.5% and assuming some other stronger value hands are in. The more weak hands sell to him now, the less likely it is a majority is reached if he makes an offer. As is, $30-35 is simply too low.

[rkluwer]

If u read Mittleman's new Letter and see what happend to Revlon shares after the report and see that Ron P startet buying again. One can't help but think, he should come with and offer soon.....

 

http://phx.corporate-ir.net/phoenix.zhtml?c=81595&p=irol-sec  - Revlon ir

 

https://www.docdroid.net/Td5kFmC/mim-second-quarter-2017-investment-review.pdf - Mittleman

[rkluwer]

Ron P keeps buying.... at what percentage ownership, does he have to put in an offer for the whole company ?? 90% or.....

[Homestead31]

Mittleman Brothers taking steps to try to defend the little guys...

 

http://archive.fast-edgar.com//20170822/AN22O22CH222FTZ222262ZXD69T7V2222292/revlonex992-082117.pdf

[KJP]

Ron P keeps buying.... at what percentage ownership, does he have to put in an offer for the whole company ?? 90% or.....

 

There is no ownership threshold that would require him to make an offer for the remaining shares, but once he gets to 90% he can force remaining shareholders to sell if he chooses to do so.  Google "Delaware short-form merger" for the details.

[indirect]

Ron P now owns 84.4%. Shorts are getting squeezed. Anybody selling? Rate on borrow still low, not to FFH levels

[indirect]

Looking more and more like Porsche squeeE

 

[txvalue]

With some value hands holding and RP trying to drive ownership to just under 90% there are some interesting dynamics here.

 

Anyone have any color on if he will make an offer for the whole ball of wax? With only about 15% of the stock left it would not be incredibly expensive even at a premium.  Just a bit confused on the strategy he is using to get to his desired outcome. I have begun to slowly sell shares to hedge against something going off the rails for minority holders.

 

My value for the stock with out RP is low to mid 40's so we are beginning to creep up on fair value when you factor in the majority shareholder's history.

 

Returns over the past month:

Rev 66%

Coty 1.7%

AVP  -6.4%

LRLCY - 1.6%

[Cigarbutt]

I haven't made my mind on this one yet.

 

GARP investing should be the way to go but usually GARP investing feels like sitting on the fence (between value and growth). The GARP area just feels like a no man's land these days. So, I look at distressed, injured and even pestilent opportunities.

 

Revlon was founded in 1932, during the Great Depression and has shown enduring power in its space. It still has brand value. in 1984, it was thought that Revlon was worth more dead than alive. Then, in 1985, Ron Perelman, through a (very) leveraged buyout took Revlon private and through focus on the "beauty" business eventually, and at least for a while, turned things around. Revlon does not sound like a success story but Mr. Perelman has had a recurring tendency to buy low when appropriate.

 

Now Revlon is already very much levered and it hard to see the strategy behind Mr. Perelman's increasing stake. One has to balance the potential positive of an eventual premium if/when it occurs versus the potential negative of a patient and shrewd investor buying as the knife keeps falling.

 

 

[tombgrt]

Interesting dynamic at work here. Mittleman increased position a little and sits at 5.7%. They claim 3.5% are other value guys not likely to sell out cheaply. The both combined make up 9.1%, over half of the 15%+ free float. This thing getting illiquid quickly!

 

[Cigarbutt]

In a letter sent last September 15th, Mr. Perelman stated that he was not "presently" intending on taking the company private.

My understanding is that he has continued to buy shares after that date.

89% ownership could be a potential trigger.

Feels like a creeping tender offer but the trouble is that Mr. Perelman does not mind "messy" undertakings and legal disputes.

He could also opportunistically wait for share price weakness.

There may be a last puff in this but timing will be very tricky.

 

[Cigarbutt]

Q3 results out.

Poor results. "Disappointing".

 

Recently released report by a relatively large investor, with some details about "interactions" with the controlling shareholder.

https://www.docdroid.net/dN7Ue02/mittleman-q3-2017.pdf#page=6

 

 

[educatedidiot]

Disappointing is putting it mildly.

 

Declines in the core Consumer segment seem to be accelerating and now hit -10.5%, and the Professional segment didn't fare much better with a 9.9% decline.  EBITDA was down more than 50% year over year.  Not exactly the trends you want to see when debt to EBITDA is over 11x and rising:

 

http://www.rocketfinancial.com/Financials.aspx?fID=8140&p=1&pw=268578&rID=1&tID=1&stID=1

 

[tombgrt]

I've sold out after selling some earlier.

 

Suprisingly, the stock is barely down. I'm assuming someone is buying...

 

 

Onwards to better pastures!

[kab60]

I sold out a month or two ago as well. It seemed cheap when I invested, now it's a highly leveraged turnaround. Facts changed,  I'm out. Don't like high leverage and falling revenues despite its somewhat recession proof model.

[Foreign Tuffett]

You don't think their history with acquisitions like Playtex/Max Factor, Sinful, Colomer are relevant to your hopes for RDEN?  RDEN is no easy feat - it very nearly flushed itself totally down the toilet!  The fragrances have been a total disaster.  Arden itself has some possibilities but damn this is a really grandmother brand, barely getting proper shelf these days and totally reliant on the gift/promotion category. The only easy thing is the cost-stripping.  Getting it growing properly is going to take real skill and work and good fortune. 

 

You don't think the revolving door history of Fellows, Nugent, Stahl, Kennedy, Ennis, Kennedy (again), Delpani are relevant to your hopes for Garcia? Some of these guys were their day's great hopes brought in from Colgate, Neutrogena, Coca Cola etc. to save Revlon. Most barely lasted a couple years.

Revlon isn't expensive today at somewhere just under $5bn EV, but it's not even close to cheap on a simple cash on cash analysis. It's around 10 time EBITDA (and that ignoring some pension overhang and a hefty chunk of instore presentation costs that are getting capitalized).  It's cheap when compared to EL, L'oreal and Coty.  But it's totally crazy to simply expect a comparable multiple.  These other companies (or the people behind them - I'm thinking Becht at Reckitt) have histories over the last 10, 20 and 30 years of making their shareholders sustained double digit cagrs.  Revlon has made it's shareholders nothing for an investing lifetime.  What discount is that worth?

 

If Revlon were a decent brand asset and it's owner a decent manager the arithmetic levers of compounding over 30 years should be making a total nonsense of any subtle analyses of discounts to IV.  It's simply far too much time.  A 7% cagr would get you an 8 fold increase over the period. A 3.5% cagr would get you a triple.  And I certainly wouldn't be here being accused of missing how price =/value unless I were a total idiot.  But Pantry didn't buy Revlon for 80 times EBITDA or 30 times EBITDA back in 1985 - or anything even vaguely close. 

 

If you don't want to look at the history of this company in making your decisions thats fine - I won't belabor the point any more.  But the arguments you've made about the discount to comps, the new ceo, the new market/acquisition, and a newly motivated perelman...well, they've all been made before, multiple times, and if you guys happen to be right this time it's probably just dumb luck because it's not that much cheaper, better-ceo'ed, less perelmanned or better equipped with cosmetic assets today that it's been at any other point in it's sad life.

 

In light of Revlon's CEO stepping down today, these were some prescient observations

[SnarkyPuppy]

Is anyone still watching this and have any thoughts on how this plays out? 

 

Fascinating with Perelman continuing to eat up the shares with Mittleman effectively blocking the 90% threshold requiring minority shareholders to approve a tender for the remaining shares. 

 

Mittleman seems to be playing with absolute fire here.  Claims Perelman controls 87.1%, Mittleman controls 4.3%, index funds ~4%, and ~2% in the hands of "other informed value investors" 

[bathtime]

New lows. Perelman has not been buying. Second largest Mittleman holding. Bonds taking a new hit in last couple weeks. 

 

How does Perelman capitalize on his 87% equity stake?

 

Mittleman say Elizabeth Arden had other bidders when Revlon bought. And that the brand has turned around. Could that brand be sold for $1-2 billion to create a large amount of breathing room for Revlon as a whole?

 

Anyone see bankruptcy for the equity as likely?

[5xEBITDA]

2Q20 numbers are truly inspiring. Of $45.4 million Adjusted EBITDA, $22.4 million (49.3%) are restructuring fees and expenses and another $17.9 million (39.4%) are estimated COVID-19 pandemic charges.

 

So, 50% of EBITDA is not real and close to another 50% is just made up.

[rb]

2Q20 numbers are truly inspiring. Of $45.4 million Adjusted EBITDA, $22.4 million (49.3%) are restructuring fees and expenses and another $17.9 million (39.4%) are estimated COVID-19 pandemic charges.

 

So, 50% of EBITDA is not real and close to another 50% is just made up.

LOL!!!

 

Here you go my friend

[5xEBITDA]

2Q20 numbers are truly inspiring. Of $45.4 million Adjusted EBITDA, $22.4 million (49.3%) are restructuring fees and expenses and another $17.9 million (39.4%) are estimated COVID-19 pandemic charges.

 

So, 50% of EBITDA is not real and close to another 50% is just made up.

LOL!!!

 

Here you go my friend

 

:)

[Ballinvarosig Investors]

What sort of moron buys an unsecured bond from Ron Perelman?

 

https://www.bnnbloomberg.ca/revlon-seeks-to-buy-time-with-debt-swap-amid-pandemic-sales-drop-1.1471553

The makeup company, hit hard by store closings to contain the virus, is seeking to exchange its 5.75% bonds due in 2021 for new notes with the same coupon maturing in 2024, the firm said in a regulatory filing Monday. The move would give the company more time to manage its debts as it focuses on executing its turnaround plan.

 

Revlon is asking bondholders to take a haircut of 20 to 25 cents on the dollar from par value of 100 cents. Investors who exchange their notes by 5 p.m. in New York on August 7 are eligible to receive $750 of principal and a $50 premium for every $1,000 of bonds they turn in.

 

The final deadline for the exchange, with less favorable terms for bondholders, is 11:59 p.m. on August 21. The offer is contingent on the participation of 95% of bondholders and consent from Revlon’s term loan lenders. Investors who don’t participate risk having protections known as covenants removed from their holdings.

 

With the equity approaching worthlessness, surely the chances increase that Perelman try and screw shareholders?

[5xEBITDA]

What sort of moron buys an unsecured bond from Ron Perelman?

 

https://www.bnnbloomberg.ca/revlon-seeks-to-buy-time-with-debt-swap-amid-pandemic-sales-drop-1.1471553

The makeup company, hit hard by store closings to contain the virus, is seeking to exchange its 5.75% bonds due in 2021 for new notes with the same coupon maturing in 2024, the firm said in a regulatory filing Monday. The move would give the company more time to manage its debts as it focuses on executing its turnaround plan.

 

Revlon is asking bondholders to take a haircut of 20 to 25 cents on the dollar from par value of 100 cents. Investors who exchange their notes by 5 p.m. in New York on August 7 are eligible to receive $750 of principal and a $50 premium for every $1,000 of bonds they turn in.

 

The final deadline for the exchange, with less favorable terms for bondholders, is 11:59 p.m. on August 21. The offer is contingent on the participation of 95% of bondholders and consent from Revlon’s term loan lenders. Investors who don’t participate risk having protections known as covenants removed from their holdings.

 

With the equity approaching worthlessness, surely the chances increase that Perelman try and screw shareholders?

 

Although I agree that it is sort of an open secret on the Street that you don't become a RP creditor without expecting to be screwed, these are pretty market terms for a debt exchange offer. I'd expect RP to try and screw minority shareholders yes, but we are nearing the point where power is shifting to secured creditors and this will likely be a creditor vs. creditor fight.

[DiggingForValue]

Will be very interesting watching this play out...

 

https://www.fr24news.com/a/2020/08/citis-900-million-fault-raises-stakes-in-revlon-showdown.html

 

Any opinion how this changes the calculus? As far as I can tell, this just takes a $900m 2nd lien borrower, pays him off, and substitutes Citi as an unsecured creditor (someone's having a really, really bad week). Curious if others have different opinions.

[bathtime]

Hope someone got that two week triple off the lows! I had a small call position on the way down but timing wasn’t perfect so not much profit.