Coty reaffirms interest in Avon
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.
FaceLube skin care targets men
A recent study by market research company NPD Group found that most men are using some sort of grooming product today, such as shave, hair care and fragrance; however, only 25% of men are currently using facial skin care products. The findings suggest that the market is poised for growth, but noted that the challenge is getting him involved and engaged.
The challenges have not gone unnoticed by FaceLube, a new men’s grooming and skin care line that is taking a unique approach to engaging him.
You won’t find FaceLube in the typical personal care aisle or department store counter. FaceLube founder Candace Chen said it is going where the men are, and by year’s end will be selling the product line at new car dealerships.
FaceLube, through its packaging and product descriptions, draws analogies from vehicle maintenance and is in the midst of developing its “2013 models” of product.
Personal care takes to the Internet
With the help of YouTube and Facebook, several beauty and personal care companies are proving that Internet marketing can indeed be quite successful. One prime example is Orabrush, which makes an FDA-approved tongue cleaner. Through a series of YouTube videos, Orabrush went from an online-only offering to now being sold in 20,000 drug stores, supermarkets, discount stores and supercenters.
Orabrush launched its campaign in 2009 with its original “Bad Breath Test” video, which now has more than 16 million views. The company also boasts a healthy following on Facebook with more than 300,000 fans. Since implementing its YouTube campaign, the company has become the third most subscribed sponsor channel on YouTube with more than 166,000 subscribers and more than 45 million channel views.
Meanwhile, making recent headlines with its witty YouTube commercial is Dollar Shave Club, a new e-commerce venture that offers a monthly subscription program whereby subscribers can receive — for about $1 a month — razor cartridges and a compatible stick, right to their door.