Revlon Inc. (REV) has agreed to pay a $850,000 penalty to settle
U.S. Securities and Exchange Commission charges that it misled
shareholders during a going-private transaction.
Revlon didn't admit to or deny the agency's findings. A
representative of Revlon didn't immediately respond to a request
for comment.
According to the SEC, during a voluntary-exchange offer to pay
down debt owed to its controlling shareholder, Revlon engaged in
"ring fencing" that deprived its independent board members from
knowing critical information.
"Going-private transactions create opportunities for shareholder
abuse and can have coercive effects on minority shareholders," said
Antonia Chion, associate director in the SEC's division of
enforcement. "By erecting informational barriers, Revlon kept
critically important information from its board and, in turn,
misled investors."
According to the SEC, MacAndrews & Forbes Holdings
Inc.--which owns 76% of Revlon's shares, according to
FactSet--asked Revlon in 2009 to offer minority shareholders the
option to exchange their common shares on a one-for-one basis for
certain preferred shares. The exchanged shares would then be
provided to MacAndrews & Forbes to pay down Revlon's debt.
A trustee administering the beauty-products company's retirement
plan decided that members of the plan could only tender their
shares if the transaction was signed off on by a third-party
financial adviser.
The SEC says the adviser who evaluated the potential exchange
deal found the transaction amount to be inadequate, but Revlon
didn't want to disclose the adviser's view and hence amended the
agreement it had with the trustee to ensure that this information
wouldn't be shared.
The SEC said Revlon represented the exchange offer as fair but
said in fact it was compromised because Revlon's board was unable
to consider the information about the amount's adequacy when
evaluating and ultimately approving the offer.
Class A shares of Revlon were recently up 1.8% to $20.27 in
recent trading. The stock has risen 42% in the past 12 months.
Write to Saabira Chaudhuri at saabira.chaudhuri@dowjones.com
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