NEW YORK — Two weeks after Avon rejected Coty’s bid to snap up the company in a deal valued at $10 billion, Coty is reaffirming its interest in Avon and is urging Avon shareholders to push for the offer.
As previously reported, Coty 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.
Avon swiftly rejected the unsolicited bid and stated that Coty’s offer “does not reflect the fundamental value of Avon and its global beauty care franchise.” Avon also stressed that it was committed to hiring a new CEO and, just days later, announced the hiring former Johnson & Johnson executive Sheri McCoy to as the new CEO.
McCoy will assume her role as Avon CEO as of April 23. The appointment brings to a close a four-month search to replace CEO Andrea Jung. Jung will continue as chairman of the board.
In an April 16 letter addressed to Jung, Coty outlined some of its financing and requested a look at inside information, which would give Coty a chance to then offer its best price.
“We believe strongly that the only reasonable way to reach a conclusion on overall value for your shareholders is to do so in private negotiations, after you have given us access to due diligence. We are proposing that we devote no more than a couple of weeks — at your invitation — in confidential discussions to see if we have a basis for proceeding with a transaction. If we do not, each company can move on, taking its separate course,” wrote Bart Becht, chairman of Coty, in the letter.
Coty also outlined some of its financing and stated that BDT Capital Partners has "arranged for equity commitments which, together with the equity committed to [Coty] by the Joh. A Benckiser companies, total more than $5 billion." Coty also stated that it has received a highly confident letter from J.P. Morgan Securities for the debt financing.
Becht reportedly told Reuters that JPMorgan Chase has provided a "highly confident letter" with about $9 billion of debt financing. Roughly $4 billion of that will go toward refinancing $2 billion of Coty debt, and $2 billion of Avon debt.
"Right now we have commitments for the $23.25. We will go back to our various parties to see what we should do post-due diligence," Becht was quoted as saying in a Reuters report.
Coty has indicated that it intends to structure its financing to achieve an investment grade credit rating for its debt.