But those who know him best say he has made money from Revlon. (Neither Perelman nor his spokesman would comment, given the ongoing sales process.) What is known is that after he paid $2.7 billion to Revlon in 1985, he turned around and sold the company’s noncosmetics business for $1.4 billion. He’s taken the company public, sold stock, and bought more stock again and again and again. According to the company’s 2019 proxy statement as filed with the Securities and Exchange Commission, Perelman owns about 87% of Revlon’s stock. Revlon’s equity is now worth around $1.2 billion, even though Revlon today is a very different company from the one Perelman bought 34 years ago. His stake is worth around $1 billion. It’s also interesting to note that Perelman named his then 44-year-old daughter Debra to the position of Revlon’s CEO in May 2018.
Another fact is that Perelman’s considerable fortune was not made through his ownership of Revlon. His biggest wins came from selling his television-station group to News Corp. to create what is now the Fox News Channel, and from buying and selling a series of savings and loans, including a big California thrift that he and a few smart investors bought in the 1990s and sold to Citigroup for $5.8 billion.
But what of the Delaware court ruling? Has Revlon Mode, as a legal concept, fared as well as Perelman has in the past 34 years? That’s a question I put to H. Rodgin Cohen, the senior chairman of Sullivan & Cromwell, the prominent Wall Street law firm. Cohen was not involved in the 1985 Revlon battle—few who were are still around—but his is an incisive legal mind, and he has given much thought over the years to what Revlon Mode means these days for corporate boards of directors.
What’s clear, Cohen tells me, is that over the years, corporate boards have clawed back much of the authority that Perelman’s landmark legal victory caused them to lose. The Revlon legal precedent does not apply in stock-for-stock deals, or where the vast majority of the consideration offered to shareholders is stock—as with the pending merger between CBS and Viacom or the completed merger between Disney and Fox, for example—because those can be characterized as strategic imperatives. “That’s not seen as a sale,” Cohen says, “but rather as a ‘continuation.’” It’s also the case these days that most states have “constituency statutes” that give boards of directors considerable latitude in considering the views of a company’s “main constituents,” as well as shareholders, when deciding to whom to sell a company. “Based on those statutes and case law, many, many states have explicitly rejected Revlon,” he says.
Cohen says Revlon Mode applies these days only to a “true sale” of a company, and only in industries that are not heavily regulated—such as financial services, insurance, or telecommunications—or subject to antitrust considerations. In those types of situations, he says, boards of directors are generally entitled to take into consideration not only the price being offered, but also whether regulators or prosecutors might jump in to try to block the sale. “You could take the position, I think, quite reasonably, if it’s reasonably taken, that the regulatory obstacles are such that a $75-a-share offer, which is much more likely accomplishable than an $80-per-share offer, which is less likely—$75 trumps $80,” Cohen explains. “Now, again, at some point the differential is so great that you can’t overcome it.”
Another escape valve for boards of directors over the years has been developed in what is known as a “no-shop provision.” In other words, if a company reaches a sale agreement with a buyer, but does not include any provisions in the legal documents that prevent another bidder from emerging with a higher offer, then boards can get protection from having to sell to the highest bidder or from having to engage in a far-reaching sale process. In this example, another bidder could come along, offer a higher price, and potentially break up the first deal without the board being criticized legally. “Where Revlon comes up a lot,” he says, “is whether you have to shop the company in order to determine the best price reasonably obtainable. The general perception is that you do not, provided that there are no obstacles of significance against somebody coming in over the top.”