Tags: Coty | Avon | Berkshire | bid

Coty Raises Avon Bid to $10.7 Billion With Berkshire Backing

Thursday, 10 May 2012 09:05 AM

Coty Inc. raised its offer to acquire Avon Products Inc. to about $10.7 billion and said Warren Buffett’s Berkshire Hathaway Inc. will provide financing as the perfume-maker seeks to draw Avon into negotiations.

The new offer of $24.75 a share, up from a previous bid of $23.25, is subject to due diligence and other conditions, New York-based Avon said in a statement today that included a letter it received from Coty. The offer will be withdrawn by May 14 if Avon doesn’t enter discussions, Coty said.

Buying Avon would give Coty a new door-to-door channel for selling its cosmetics and more than twice its $4.5 billion in annual sales. Avon rejected Coty last month, saying the offer undervalued the company and that it was implementing a turnaround. Avon said today it will consider Coty’s letter “in due course.”

Coty said in its letter that equity financing for its bid will come in part from from Berkshire Hathaway, while JPMorgan Chase & Co. will provide debt financing. Yesterday JAB Holdings B.V., the company that controls Coty, said it plans to sell $2 billion of Reckitt Benckiser Group Plc shares to fund deals.

There have been about 280 takeovers in the cosmetics and toiletries industry in the past decade, the largest being Procter & Gamble Co.’s $57.3 billion takeover of Gillette Co., according to data compiled by Bloomberg. The median price to earnings before interest, taxes, depreciation and amortization paid in almost 30 of those deals was 10.8 times, in line with Coty’s new offer.

Avon rose 1.2 percent to $21.86 at 8:23 a.m. in New York. The shares had gained 24 percent this year before today.

Some Conversations

After not talking in the weeks following Coty’s offer on April 2, advisers to Coty and Avon have in the last two weeks begun having some conversations about Coty’s offer, people familiar with the matter have said. The talks, which had focused on Coty’s concerns about liabilities at Avon and internal departures of employees, had yet to progress toward a deal, said the people, who declined to be named because the discussions are private.

Coty, also based in New York, has been frustrated that Avon shareholders haven’t pressed Avon to discuss the merger, said one of these people.

Richmont Holdings, a closely held company that invests in consumer brands, is working on its own bid for Avon, according to two people familiar with the matter.

Avon last month appointed former Johnson & Johnson executive Sherilyn McCoy as chief executive officer to reverse three years of profit declines and complete an investigation into its overseas business practices. The company and the U.S. Securities and Exchange commission are probing whether executives bribed foreign officials in violation of the Foreign Corrupt Practices Act.

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Thursday, 10 May 2012 09:05 AM
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