Wilmington, Delaware : Revlon Inc. officials agreed to pay more than $9.2 million to resolve investors’ claims that Ronald Perelman, the controlling shareholder, shortchanged them in a deal designed to acquire common stock he didn’t already own.
Revlon, maker of Almay cosmetics and Mitchum deodorant, will pay the money to resolve eight lawsuits filed by company investors in state and federal courts in Delaware and New York over a 2009 share-exchange offer involving Class A common shares. Shareholders said Perelman sought to acquire the shares at an unfair price.
The cosmetic maker’s executives agreed to the accord to “eliminate the burden and expense of further litigation and to put the settled claims to be released hereby to rest finally and forever,” Revlon’s lawyers said in a filing on Tuesday in Delaware Chancery Court in Wilmington.
Revlon said last month that it will cut about 250 jobs as it closes two plants as part of a $10 million cost-reduction plan. The job cuts represent about 4.8 per cent of the company’s total headcount as of the end of last year. New York-based Revlon employed 5,200 as of December 31, according to a company filing.
Christine Taylor, a spokeswoman for Perelman, declined to comment on the settlement of the investors’ claims.
Earlier this year, Revlon officials agreed to pay Fidelity Management & Research Co., a company shareholder, $19.9 million to resolve its claims over the share exchange. Company officials said in US Securities and Exchange Commission filings that the Fidelity settlement was separate from the other cases brought over the deal.
Lawyers for investors who sued in Delaware and New York had worked out an earlier settlement of the cases that involved additional disclosures about the deal without any financial payment.
The accord fell apart after Chancery Court Judge Travis Laster criticized the work of investors’ attorneys in the case and replaced them. Laster found the lawyers wanted to settle the case without adequately probing whether there was a basis to seek a financial recovery from Revlon.
Billionaire Perelman’s MacAndrews & Forbes, which already holds 75 per cent of Revlon’s voting shares, proposed to swap all of the outstanding shares of Revlon’s Class A common stock it didn’t own for preferred stock.
Investors alleged in court filings that Perelman had positioned Revlon to reap “enhanced future revenues and earnings” from new product offerings and wanted total control of the shares to take advantage of increasing profits.
Revlon executives said in an SEC filing on Tuesday that they set aside $6.7 million in the second quarter to resolve suits over the share exchange. The cosmetics maker is setting aside an additional $2.2 million in the third quarter to cover the settlement, officials added in the filing.
Laster, based in Wilmington, Delaware, still must decide whether to give final approval to the accord.