UPDATE 2-U.S. SEC says Revlon misled shareholders in a Perelman deal
* Revlon to pay $850,000 fine, does not admit wrongdoing
* SEC says Revlon hid details of proposed share swap
By Jonathan Stempel
June 13 (Reuters) - The U.S. Securities and Exchange Commission charged Revlon Inc with misleading shareholders about a transaction with its controlling shareholder, billionaire Ronald Perelman, and the cosmetics company agreed to pay a fine of $850,000.
Revlon did not admit or deny wrongdoing in settling civil charges that it withheld information that could help helped shareholders evaluate the fairness of a 2009 "going private" transaction with Perelman's MacAndrews & Forbes Holdings Inc.
The firm at the time owned 58 percent of Revlon's Class A stock and all of its Class B stock, and held 75 percent of its voting power, according to the SEC. Perelman is Revlon's chairman.
"Going private transactions create opportunities for shareholder abuse and can have coercive effects on minority shareholders," said Antonia Chion, an associate director in the SEC enforcement division. "By erecting informational barriers, Revlon kept critically important information from its board and, in turn, misled investors."
Elise Garofalo, a Revlon spokeswoman, confirmed the settlement, for which the New York-based company had set aside funds in the fourth quarter of 2012.
Revlon's brands also include Almay, Charlie and Jean Naté.
The case arose after MacAndrews & Forbes asked Revlon to let minority shareholders tender their common shares for preferred stock, with some of the tendered shares to be used to repay a $107 million loan.
According to the SEC, an outside adviser hired by the trustee for Revlon's 401(k) retirement plan concluded that the offer's terms shortchanged tendering 401(k) shareholders.
But the SEC said Revlon then took several steps, which one employee described as "ring-fencing," to conceal the adviser's opinion from its independent directors and 401(k) participants.
The SEC said this led to materially misleading disclosures by Revlon to its minority shareholders, including that the independent directors thought the swap was fair, and that the board's evaluation process was "full, fair and complete."
As of Dec. 31, MacAndrews & Forbes owned 76 percent of Revlon's Class A stock and all of its Class B common stock, and controlled 77 percent of the company's voting power.
Last October, Revlon agreed to pay $9.2 million to settle class-action and other litigation by investors who said the 2009 exchange offer shortchanged them.
Forbes magazine in March estimated that Perelman was worth $12.2 billion, making him the world's 79th-richest person.
The case is In re: Revlon Inc, SEC Administrative Proceeding No. 3-15356.