Avon Products Inc
) statement dated May 13
that it will consider the new bid and respond within a week, Coty
Inc. withdrew its revised $10.7 billion takeover bid, stating that
it failed to receive an explanation from Avon for the one week
Coty, in its letter dated May 14, informed Avon that it is no
longer interested in the buyout given the latter's reluctance to
enter into discussion regarding the proposal since its initial
offer made two months ago.
Earlier in April, Avon had turned down Coty's $10 billion public
bid to buy Avon, citing that the bid price of $23.25 per share
undervalued the company. Avon's rejection came after Coty publicly
sought 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.
On May 9, 2012, privately-held beauty company Coty approached
cosmetics maker Avon, with an inflated buyout bid offering to pay
$24.75 per share, an increase of $1.50 a share from $23.25 per
share proposed earlier last month. The total value of the revised
bid came to about $10.7 billion, against $10 billion offered
earlier. The new bid represented a 36% premium on Avon's closing
price as of March 6, 2012. The new bid is subject to due diligence
and other conditions.
Coty regrets Avon's decision to reject a compelling and
well-financed proposal, particularly given the multiple challenges
that Avon is facing. Coty's offer included equity financing
commitments from its main shareholder, Joh. A. Benckiser, BDT
Capital Partners and some of its limited partners, and Berkshire
Hathaway Inc. The company had also tied up with J.P. Morgan
Securities for debt financing.
According to Coty, the combination would have created an iconic
beauty company that would further provide new growth opportunities
for both the companies. Through the deal, the company expected
consumers to reap benefits through superior access to innovative,
quality and branded beauty products across multiple distribution
Additionally, the combination would have benefited the combined
company's product categories as each company's forte in product
offerings complement the other. Coty is a leader in Fragrances and
Nail Products, while Avon's core strength lies in Color and Skin,
and Body products. As per the offer, the new company will be named
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
Avon currently retains a Zacks #5 Rank, which translates into a
short-term Strong Sell rating. Our long-term recommendation on the
stock is Neutral.
AVON PRODS INC (AVP): Free Stock Analysis
REVLON INC-A (REV): Free Stock Analysis Report
To read this article on Zacks.com click here.