Avon Rejects Coty's Takeover Offer
Posted on April 2, 2012Avon has rejected a $10 billion takeover offer from fragrance company Coty, Inc. Avon says Coty's offer is "opportunistic and not in the best interest of Avon's shareholders."
The Avon Board believes Coty's indication of interest, which offers Avon shareholders only a 20% premium over the Company's closing share price on March 30, 2012, does not reflect the fundamental value of Avon and its global beauty care franchise. Indeed, the indication of interest represents a multiple of only 1.1 times Avon's net revenue for the fiscal year ended December 31, 2011 and 8.7 times 2011 EBITDA. This is significantly below multiples that the Board of Directors believes an iconic consumer company is worth in a change of control transaction.Avon also notes that it is currently in the process of hiring a new CEO. The company says shareholder value will improve once a new CEO is in place.
Bloomberg reports that Avon's direct selling method has been losing ground to more traditional retail methods. However, the reason Coty wants to buy Avon appears to be for its door-to-door sales channel.