NEW YORK — Just days after Coty upped its proposal for Avon, the former has decided to withdraw its offer, citing Avon’s “delay and unwillingness to engage in discussions.”
“We believe that we provided the board with ample time to respond, particularly since it has already had months to consider our initial request. Yesterday, we received a two-sentence email indicating, without explanation, that Avon's board would need another week to consider our request. Since receiving [the] email, we have reached out to Avon's board, management and advisers to understand why additional time is needed, but we have received no explanation,” Coty stated in a May 14 letter to Avon.
Coty told Avon in a letter dated May 9 that it was revising its proposal to $24.75 per share from $23.25. “We are revising our proposal to $24.75 subject to due diligence and the other conditions. This price represents a premium of [more than] 36% to the original undisturbed closing price on March 6, 2012, before our initial proposal of $22.25, and also represents [more than] $1 billion of incremental value to your shareholders, despite a materially weakened outlook for your business,” Coty wrote in the May 9 letter.
Coty had requested that Avon respond to the revised proposal by the end of business on May 14. Avon responded to the revised proposal, indicating that it was considering the sweetened bid and its board expected to respond within a week.
In the latest letter dated May 14, Coty stated that since it submitted its revised proposal, and despite repeated requests over the last 24 hours, no one from Avon's board or management has been willing to speak with Coty.
“Two months is enough. Consequently, as our deadline to begin discussions expired today [May 14], our proposal is withdrawn. It is time for Coty Inc. to move on and pursue other opportunities,” Coty stated in the letter.
In light of the news, Morgan Stanley analyst Dara Mohsenian stated in a research note that, “Clearly, we expect shares will be weak on this news. While we do believe there is still some strategic potential at Avon, as another bid could emerge or Coty could conceivably come back to the table, the stock is likely to trade more on fundamentals now.”