NEW YORK — Coty announced on Monday that it has submitted a nonbinding proposal to acquire Avon in a deal valued at about $10 billion; however, Avon has rejected the unsolicited bid.
Coty has submitted a nonbinding proposal to acquire Avon for $23.25 per share in cash. The proposal, valued at approximately $10 billion, represents a substantial premium of 27% over the three-month, volume-weighted average price for Avon shares, Coty stated.
Coty stated that it has no intention of pursuing a hostile takeover but is making its proposal public in order to inform Avon’s shareholders of what it believes is “significant value” in a transaction.
“Our objective is to engage in discussions with Avon and conduct due diligence so that we and Avon can together determine if there is a basis for a transaction. We believe Avon's shareholders would want their board to explore with us the benefits to shareholders of a transaction," stated Bart Becht, chairman of the board of directors of Coty.
Coty stated the combination would create a “new strong” company in beauty to be called "Avon-Coty." The combined company would benefit from complementary category strengths, Coty stated. Coty has a solid foothold in fragrances and nail products, while Avon has more core strength in color and skin and body products. Coty's approach to innovation, branding and execution would be used and targeted to deliver innovative products across all beauty categories for "Avon-Coty,” Coty stated.
Furthermore, Avon has a strong presence in emerging markets, with more than 68% of its revenues coming from these markets. Many of the beauty categories in these markets are dominated by "door to door" distribution. Coty stated that, while many of Coty's brands already have good levels of awareness in many of these markets, they are not widely available for sale at this point in time because of lack of Coty infrastructure. Distribution of Coty mass beauty brands via Avon's "door to door" distribution channel would, therefore, create new and attractive growth and earnings opportunities for "Avon-Coty" and its 6.4 million account representatives.
Avon, however, stated in response that, “Coty's indication of interest, which offers Avon shareholders a 20% premium over the company's closing share price on March 30, 2012, does not reflect the fundamental value of Avon and its global beauty care franchise. Indeed, the indication of interest represents a multiple of only 1.1 times Avon's net revenue for the fiscal year ended Dec. 31, 2011, and 8.7 times 2011 EBITDA. This is significantly below multiples that the board of directors believes an iconic consumer company is worth in a change of control transaction.”
Avon also stressed that it is committed to hiring a new CEO and that with a new CEO there is a “greater opportunity to improve shareholder value in excess of Coty’s conditional indication of interest.”