It was revealed on Monday that Avon Products (NYSE:
) has said that it will respond to Coty in approximately a week's
time regarding the $10.7 billion takeover offer from the perfume
maker. In the meantime, the Avon board and its advisors will
spend that week carefully considering the offer, going through
the numbers with a fine toothcomb.
April saw AVP reject an offer from Coty of roughly $10
billion, saying in a statement that the offer undervalued the
company. The rejection does not seem to have done anything to
dampen Coty's resolve, however, despite the fact that Avon has
suffered through three years of declining profit. The world's
biggest door-to-door cosmetics seller will hope that new CEO
Sherilyn McCoy will out a stop to that.
However, the decision to wait for a week might not sit well
with the people at Coty, who set today, Monday May 14, as the
deadline for a decision. They will be sitting down today to
decide whether to accept the week's delay or enforce the deadline
and demand an answer.
Coty head honcho Bart Becht is looking to get a leg up from
AVP in emerging markets like Brazil, where Avon is still popular.
Overall, Avon would more-than double Coty's $4.5 billion annual
As for the numbers, this latest offer from Coty amounts to
$24.75 per share, which is up from the previous offer of $23.25.
To prove that it has friends in high places, Coty secured equity
backing from Warren Buffett's Berkshire Hathaway (NYSE:
Berkshire will therefore provide half of the $5 billion in
equity from BDT Capital Partners, the company that is backing the
Coty might not be the most well-known name in cosmetics when
standing alone, but it has become successful by making perfumes
for the likes of Heidi Klum and Beyonce Knowles. In other words,
when you are in a store like Wal-Mart (NYSE:
) and you see those cheap, celebrity-endorsed perfumes around the
kid's section, there is a strong chance that it was made by
There is some controversy clouding the deal though, with AVP
and the Securities and Exchange commission checking out whether
some executives bribed foreign officials. That sort of scandal
would surely jeopardize the whole takeover. Meanwhile, some of
AVP's board don't want to turn over all of the information that
Coty is seeking. All in all, there is much work to be done if
this deal is ever going to go through.
On Friday, AVP saw a fall of 3.4% to $20.19, which is roughly
18% below the Coty offer.
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