AVON PRODUCTS, the target of an unsolicited $10 billion offer from privately-held rival Coty, sees some strategic benefits in a combination and previously considered buying the fragrances seller, according to a person with knowledge of the situation.
Coty’s cash proposal of $23.25 a share is 20 per cent higher than Avon’s closing price last Friday.
Avon quickly rejected the offer, saying a deal wouldn’t be in the best interests of shareholders.
For now, Avon is focused on finding a chief executive officer and close to choosing a replacement for current chief executive Andrea Jung, said the person, who declined to be identified because the matter is private. Avon, based in New York, could become open to talks once a CEO is selected, the person said.
Avon is looking to reverse slowing sales amid an internal probe that prompted a 40 per cent drop in its shares last year.
Coty, the seller of perfumes by Heidi Klum and Beyonce Knowles, is making the proposal public to get shareholders interested in a deal that would triple its $4.5 billion in annual sales.
“Coty clearly wants to do this deal,” Ali Dibadj, an analyst at Sanford C Bernstein and Co in New York, said yesterday in a telephone interview.
Avon rose 16 per cent to $22.54 at 1.30pm in New York yesterday.
“We are committed to hiring a new CEO and executing against what the company believes are its strong long-term prospects,” Jennifer Dwyer Vargas, an Avon spokeswoman, said in an emailed statement. “The board has been clear that with a new CEO, it believes there will be greater opportunity to improve shareholder value.”
A spokesman for New York-based Coty didn’t immediately return a call seeking comment. Buying Avon would give Coty, owned by the largest investor in European consumer-products maker Reckitt Benckiser, a new door-to-door channel for selling its cosmetics.
The takeover would be the biggest in the industry since Procter Gamble’s 2005 purchase of Gillette for $57.3 billion including debt.
Founded in 1904 in Paris by Corsican-born François Coty, the company helped develop perfume into a mass product. – (Bloomberg)
