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AZUSA, Calif. and CITY OF INDUSTRY, Calif. — Markwins International plans to acquire Physicians Formula Holdings Inc. for nearly $75 million.
Physicians Formula said Thursday that before entering into the agreement with Markwins, it terminated its $65 million deal to be acquired by affiliates of Swander Pace Capital, which would have taken Physicians Formula private.
Under the terms of the agreement with Swander Pace Capital, Physicians Formula will pay a termination fee of about $1.29 million to the private equity firm’s affiliates.
Physicians Formula had announced on Sept. 6 that it had received an unsolicited acquisition bid but didn’t disclose the name of the suitor. The cosmetics and skin care company said at the time that it was engaged in talks with Swander Pace Capital affiliates and the third party as it evaluated the proposal.
In the deal unveiled Thursday, Markwins will acquire all of the outstanding common stock of Physicians Formula for $4.90 per share in cash, or about $74.9 million. The companies said the per-share price represents a premium of 33% to Physicians Formula’s closing stock price on Aug. 14 — the trading day before Physicians Formula announced the agreement with Swander Pace Capital — and a premium of 40% to Physicians Formula’s one-month, volume-weighted average price as of that same date.
Physicians Formula said its board has unanimously approved the deal with Markwins and will recommend that Physicians Formula stockholders vote to adopt the agreement.
"Our board of directors, following a thorough analysis by its special committee, has unanimously determined that the proposed merger with Markwins offers the best value for our stockholders," stated Ingrid Jackel, Physicians Formula chairwoman and chief executive officer. "We are pleased that Markwins has agreed to purchase our company. Markwins and Physicians Formula sell non-competing brands in similar channels. Combining the resources and experience of both companies will strengthen the combined portfolio of brands."
According to Thomas Lynch, chairman of the Physicians Formula board’s special committee, "Following receipt of Markwins’ acquisition proposal, the special committee oversaw negotiations with Markwins that resulted in an increase in the aggregate merger consideration to stockholders of approximately $10 million, or a 15% increase to the Swander Pace offer. We believe this all-cash sale of Physicians Formula to Markwins is in the best interests of the stockholders of Physicians Formula."
When the deal closes, Physicians Formula will be owned by Markwins and the employees of Physicians Formula will become employees of Markwins, the companies said. At present, Physicians Formula employees will continue to be based at the company’s facilities in Azusa, Calif.
"The acquisition of Physicians Formula fulfills a strategic Markwins objective to expand and diversify our already robust brand portfolio. We believe this is a synergistic acquisition that creates an immediate opportunity to broaden our consumer base and enrich our retail partnerships," commented Markwins CEO Eric Chen. "Physicians Formula is widely recognized for its innovative beauty solutions and loyal customer base, which makes it a natural complement to the ideology of all Markwins brands. Markwins believes this purchase reflects fair value to current shareholders, while delivering on the company’s expectations of high-growth and continued global expansion."
The deal with Markwins, which is subject to various closing conditions, including Physicians Formula stockholder approval, is expected to close later this year.
