Tags: Coty | Avon | Offer | billion

Coty Withdraws $10.7 Billion Avon Offer After Talks Spurned

Tuesday, 15 May 2012 07:42 AM

Coty Inc., the maker of perfumes by Beyonce Knowles, withdrew its sweetened $10.7 billion offer for Avon Products Inc., saying the world’s largest door-to-door cosmetics seller refused to negotiate.

“This continued delay and unwillingness to engage in discussions is disappointing,” Coty Chairman Bart Becht said in a letter to Avon’s board of directors, which was released in a statement. “It is time for Coty Inc. to move on and pursue other opportunities.”

Avon, which rejected an initial $10 billion offer as too low, yesterday asked for another week to consider the sweetened bid as the deadline for an answer expired. Coty said attempts to speak to board members, including Chairwoman Andrea Jung and Chief Executive Officer Sheri McCoy, failed after it received a two sentence e-mail requesting a deadline extension.

Coty had equity commitments for the bid of more than $5.8 billion from Joh. A. Benckiser, BDT Capital Partners and Warren Buffett’s Berkshire Hathaway Inc. with debt financing to be provided by JPMorgan Chase & Co. it said. 

“Your total lack of engagement with us leads us to believe that you remain reluctant to explore a friendly, negotiated combination,” Becht said.

Jennifer Vargas, a spokeswoman for Avon in New York, didn’t immediately respond to a voicemail on her office line and e-mail from Bloomberg seeking comment and left outside of normal business hours.

Avon shares rose 3.8 percent to $20.96 yesterday in New York and have risen 20 percent this year.

Distribution Network

Becht targeted Avon to add a door-to-door distribution channel for Coty’s cosmetics and more than double its $4.5 billion in annual sales from brands including Calvin Klein, Cerruti, Marc Jacobs and Wolfgang Joop.

Coty last week raised its offer to $24.75 a share, from an initial proposal of $23.25, and said Berkshire Hathaway would provide equity financing for the deal.

New York-based Avon has posted three straight years of falling earnings and last month hired McCoy as CEO from Johnson & Johnson to replace Jung and pursue a turnaround.

The company is also facing an investigation into possible bribery in its overseas operations.

In regulatory filings last year, Avon said it had fired four executives suspected of paying bribes to officials in China. The company also disclosed an internal investigation into its compliance with the Foreign Corrupt Practices Act.

There have been about 280 takeovers in the cosmetics and toiletries industry in the past decade, the largest being Procter & Gamble’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.

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Tuesday, 15 May 2012 07:42 AM
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