* LG Household shares rise 3 percent on news of potential
* Elizabeth Arden has a market value of $845 million
* LG Household would gain globally recognized luxury
* Elizabeth Arden shares rise as much as 17 pct
(Adds Elizabeth Arden share movement, background)
By Se Young Lee
SEOUL, April 23 South Korea's LG Household &
Healthcare Ltd said it is considering a bid for U.S.
cosmetics firm Elizabeth Arden Inc, an acquisition that
would give it globally recognized luxury brands and would be its
most ambitious to date.
Elizabeth Arden's shares rose as much as 17 percent on the
Nasdaq on Wednesday.
The company, which has a market value of $845 million, has
seen its sales hit by a much weaker-than-expected North American
retail market as well as deep industry discounting in key
European markets that have eroded profit margins. Its shares
have fallen 20 percent so far this year.
LG Household, keen to expand its product lines and reach,
has completed 12 acquisitions since 2007, though the biggest of
these has been a relatively small $375 million purchase of a
Four of its five latest deals were overseas acquisitions,
including Japanese cosmetics firm Everlife and Canadian retailer
Fruits & Passion.
"LG Household has grown so far based on M&A. We are looking
at several potential deals at the moment for the same reasons,
and Elizabeth Arden is one potential option," said a company
spokesman, responding to a report in the Maeil Business
Newspaper about the potential bid.
"We are considering both local and overseas deals," he
Elizabeth Arden did not respond to requests for comment.
LG Household, No.2 in the South Korean cosmetics market with
brands such as Whoo and O Hui, saw its shares climb 3 percent in
a flat market on hopes that Elizabeth Arden would provide it
with a new growth engine.
"Should the deal materialise, the key will be how much
synergy (LG Household) can generate by acquiring new product
lines and selling them in Asia," said Meritz Securities analyst
"Elizabeth Arden's margins are also lower than LG
Household's, so there is also potential for increased value
Elizabeth Arden trades at a 12-month forward
price-to-earnings multiple of 16.8, compared with its
U.S.-listed peers forward P/E of 22.1, according to Thomson
Reuters data. LG Household trades at a forward P/E of 20.8.
The company posted a 10.6 percent decline in second-quarter
net sales in February. Sales at its North America business
declined 13 percent, hit by weaker-than-expected holiay sales.
In addition to its namesake brand, Elizabeth Arden is known
for celebrity brand perfumes such as those of Taylor Swift and
Justin Bieber, as well as skin care brands like Ceramide and
The company sells its products to U.S. chains such as
Wal-Mart Stores Inc, Target Corp and Kohl's
, as well as department stores including Nordstrom Inc
and Macy's Inc.
Elizabeth Arden's net income attributable to shareholders
fell to $34.95 million for the fiscal quarter than ended Dec.
31, down from $44.81 million a year earlier. It has said it is
working on a fundamental reexamination of how it executes its
business, particularly internationally.
The company's shares were up 12.7 percent at $32.05 in late
(Additional reporting by Denny Thomas in Hong Kong and Maria
Ajit Thomas in Bangalore; Editing by Edwina Gibbs)