Avon Calling Coty in a Week


It was revealed on Monday that Avon Products (NYSE: AVP ) 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 sales.

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: BRK ).

Berkshire will therefore provide half of the $5 billion in equity from BDT Capital Partners, the company that is backing the bid.

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: WMT ) and you see those cheap, celebrity-endorsed perfumes around the kid's section, there is a strong chance that it was made by Coty.

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.

Follow me @BCallwood .

(c) 2012 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Earnings

Referenced Stocks: AVP , WMT


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