Avon Products Inc.
(
AVP
), the world's largest direct seller of beauty and related
products, rejected privately held beauty company Coty Inc's public
bid to buy Avon for about $10 billion. Avon's board refused Coty's
offer citing that the bid price of $23.25 per share undervalues the
company.
Avon's rejection on the takeover bid came after Coty went public
in order to indulge Avon in a discussion regarding the buyout.
Previously, Coty's three proposals to Avon's CEO failed to bring
Avon to a discussion or to arouse any interest in the buyout
deal.
The $23.25 per share bid represents a 27% premium from the three
month volume-weighted average price for Avon shares as well as a
20% premium over the company's closing share price on March 30,
2012.
However, Avon believes Coty's proposal is opportunistic and aims
to take advantage of Avon's business woes, such as the bribery
probe, declining sales and the absence of a CEO. Further, the
company believes the deal is not in the best interest of the
shareholders as it remains confident of executing well on its
strong long-term goals.
Further, Coty's proposal indicates readiness to raise the bid if
Avon is able to determine its worth higher than what is calculated
from the publicly available information. On account of this, Avon
does not see Coty's proposal as a real offer. It believes Coty is
venturing to take a "free look" at Avon, who is not committing to
close the transaction at any definite price.
According to Coty, the combination would create an iconic beauty
company while providing new growth opportunities for both
companies. Through the deal, the company expects consumers to reap
benefits of superior access to innovative, quality and branded
beauty products across multiple distribution channels.
Additionally, the combination will benefit the product
categories as each company's forte in product offerings will
complement the other. Coty is a leader in Fragrances and Nail
Products, while Avon core strength lies in Color and Skin, and Body
products. The offer proposed to call the new company Avon-Coty.
Founded in 1904 by a perfume maker, Coty is a leader in global
beauty with annual net sales of $4.5 billion. The company has grown
into a supplier of fragrances and nail polishes, having a portfolio
of notable brands. The company sells its products to consumers in
about 135 markets worldwide.
Avon Products is a leading global beauty company targeting women
consumers in over 100 countries through 6.5 million independent
sales representatives. The company faces stiff competition from
other direct-selling companies as well as companies selling through
prestige retail channels. One of the prime competitors of Avon is
Revlon Inc.
(
REV
).
Avon currently retains a Zacks #3 Rank, which translates into a
short-term 'Hold rating. Our long-term recommendation on the stock
is 'Neutral.
AVON PRODS INC (
AVP
): Free Stock Analysis Report
REVLON INC-A (
REV
): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment
Research