UPDATE:Coty Raises Avon Offer To $10.7 Billion, Buffett's Berkshire Joins Bid
May 10 2012 - 9:22AM
Dow Jones News
Fragrance maker Coty Inc. added the firepower of Warren
Buffett's Berkshire Hathaway Inc. (BRKA, BRKB) to its group bidding
for Avon Products Inc. (AVP), and submitted a sweetened $10.69
billion offer to try to bring the struggling beauty-products
company to the table.
Coty's new offer for $24.75 a share of Avon is 6.5% higher than
the prior bid of $23.25. The company is asking Avon's board for a
three-week diligence process and private negotiations. It has set a
Monday deadline for Avon to respond to the offer, or it would
withdraw the proposal.
Avon, which is trying to embark on a turnaround under new Chief
Executive Sherilyn McCoy, said it would consider the letter in due
course.
In addition to the higher offer, Coty revealed that Berkshire
Hathaway, the holding company of famed investor Buffett, has will
be contributing equity toward the bid, alongside Coty's principal
shareholder Joh. A. Benckiser and others. JP Morgan Securities is
financing the deal.
Coty is upping the pressure on Avon after the door-to-door
beauty company released yet-another disappointing quarterly
earnings report last week, where margins fell much more than
expected and the company warned that of prolonged weakness in
Brazil, it's largest market, and the U.S.
McCoy, who joined Avon late last month, replacing longtime CEO
Andrea Jung, is just starting to wrap her arms around the problems
Avon faces, from operational issues like a botched implementation
of a information technology platform in Brazil to a shifting
landscape for beauty sales across the globe giving consumers more
options than door-to-door sellers. She planned to visit a number of
Avon's top markets over the next month to try to figure out the top
issues to tackle.
Coty says it doesn't intent to wait for Avon to test its
stand-alone turnaround plan. Coty is eying Avon for its emerging
market footprint and door-to-door sales network, which it hopes can
help sell more Coty products in those channel.
Coty said it is prepared to sign a confidentiality agreement
with standstill provisions that would restrict it from publicly
taking further steps to acquire Avon, as long as the company agrees
to provide requested information on a timely basis.
Shares were up 1.1% at $21.85 premarket. The stock is up 24% so
far this year.
-By Paul Ziobro, Dow Jones Newswires; 212-416-2194;
paul.ziobro@dowjones.com; Twitter: @pziobro
-Melodie Warner contributed to this article.
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