Revlon Agrees to $850,000 SEC Settlement
Revlon Inc. put too much lipstick on its 2009 go-private deal and misled shareholders, according to the Securities and Exchange Commission, which on Thursday charged the cosmetics company with violating federal securities law.
Filing charges [PDF] under Section 21C of the Securities Exchange Act, the SEC argued that Revlon committed fraud or deceit upon Revlons minority shareholders. In a statement announcing the charges, the SEC noted that Revlon did not want to disclose the third-party financial adviser's view on the adequacy of the transaction's consideration. In an attempt to avoid a potential disclosure obligation, the company engaged in what one employee termed as ring fencing to avoid receiving the adequate consideration determination from the third-party adviser.
According to a Reuters report on the charges, 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. And when Revlons third-party adviser questioned the deals benefit to shareholders, Revlon then took several steps . . . to conceal the adviser's opinion from its independent directors and 401(k) participants.
Revlon agreed to an $850,000 settlement with the SEC, without admitting or denying any wrongdoing.
In the SECs statement, Antonia Chion, associate director of the Division of Enforcement, said, "Going private transactions create opportunities for shareholder abuse and can have coercive effects on minority shareholders," adding, "By erecting informational barriers, Revlon kept critically important information from its board and, in turn, misled investors."