Coty's $10 Billion Bid for Avon Has Wall Street's Support

Nichole Harper
02 Apr, 2012
New York City

Avon Products rejected $10 billion cash offer from a privately held Coty. The perfume seller said it does not want to proceed if Avon rejects its friendly overtures but pressured the company to open its books that may lead to a higher offer.

[R]12:25 PM – Avon Products rejected $10 billion cash offer from a privately held Coty. The perfume seller said it does not want to proceed if Avon rejects its friendly overtures but pressured the company to open its books that may lead to a higher offer.[/R]

Coty, Inc., the privately held cosmetic maker proposed to acquire cosmetics maker Avon Products, Inc. for $23.25 a share in an all-cash deal valued at about $10 billion.

The offer price of $23.25 per share represents a 20% premium to Avon's closing price of $19.36 on Friday.

However, Avon immediately rejected the unsolicited bid, deeming the offer as ""opportunistic and not in the best interest of Avon's shareholders.""

Coty said its several approaches to Avon in the last two months were rebuffed by its long time chief executive Andrea Jung and the company board.

Privately held Coty with $4.1 billion in sales in 2010 has been a on a buying spree in the last few years but the latest offer for Avon will nearly triple its sales and expand its reach into fast growing emerging markets in China and Russia.

Coty acquired a majority stake in China based TJoy Holdings Ltd in December 2010.

Avon Products’ 2011 sales were $11.1 billion and net income was $522 million. While annual sales have struggled between $10 billion and $11 billion in the last three years at the company net income has declined from $882 million in 2008 to $522 million in 2010.

Coty, named after its founded Francois Coty was founded in 1906 in Paris, is controlled by John A. Benckiser and his company also controls a stake in Reckitt Benckiser that is widely known in the UK and several Asian markets for its household products.

Coty hopes that the Avon acquisition will increase its celebrity branded perfume sales in the U.S. and Europe through the network of direct sellers in the U.S. and Europe and in addition to launching its businesses in several emerging markets.

Avon Products has been struggling in the last few years and the company is looking to replace its long time Chief Executive Officer Andrea Jung after sales growth slowed and the company is mired in an internal probe of its Chinese operations that may have violated anti-bribery laws in the U.S.

Coty said in a statement that JP Morgan Chase & Co. is hired to line up debt financing and BDT & Co. is raising equity capital for the deal. JP Morgan Chase and Blackstone Group LP are acting as financial advisor to the company and Skadden Arps Slate Meagher & Flom LLP is the legal advisor.

Avon ((AVP)) stock rose 15% to $22.08 but has fallen from its high of $44.35 in August of 2008 and struggled in the last three years of trading.