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REVLON's $4.7 BIL. OFFER FOR GILLETTE REPRESENTS 45% PREMIUM

Executive Summary

REVLON's $4.7 BIL. OFFER FOR GILLETTE REPRESENTS 45% PREMIUM over the Boston, Mass. consumer product company's May pre-runup stock price. Revlon Chairman Ronald Perelman's June 17 letter offering cash of "at least $40.50" represents a 45% increase over Gillette's mid-May trading price of around $28 per share. Revlon's previous bid for Gillette last November was approximately 48% of the stock's value in the month before acquisition rumors ran up the price. Gillette turned down Revlon's latest offer June 18, just as it rejected the firm's earlier takeover attempt. To thwart Revlon last year, Gillette spent approximately $908 mil. to buy back Gillette shares owned by Revlon and to purchase an additional 7 mil. oustanding shares of common. Gillette said in a June 18 press release that the "board is firmly of the belief that Gillette has a bright future as an independent company." The company noted that, in rejecting Revlon's June 16 bid, it had considered internal earnings estimates compared with prevailing Wall Street estimates. Gillette posted a first quarter net income gain of 22.2% to $55 mil. on a sales increase of 16.3% to $762.1 mil. Gillette also cited the existence of a "price protection provision" in the agreement with Revlon as a reason for rejecting the approach. The provision grants Revlon the right to collect a payment if Gillette is acquired before November 24, 1987. Revlon would earn approximately $200 mil. if another company were to acquire Gillette at the stock's current price of $40.50 per share. Gillette said the provision gives Revlon an "unfair advantage" over other potential competitive bidders who would be responsible for the payment if they were successful, and thus acts as a lock-up. The November agreement also requires Gillette's consent before Revlon can make an official offer.
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