Avon Products (NYSE: AVP) said it will take a week to decide whether it will negotiate a new, sweetened deal from Coty. Coty has just gotten financial support from Warren Buffett’s Berkshire Hathaway (NYSE: BRK-B). Coty raised its offer to $24.75 from $23.25. Avon’s board has a number of compelling reasons to take the offer. The first is the legacy of former CEO Andrea Jung who ran the company into the ground mostly by mis-managing its overseas operations. It has also been alleged that on her watch there may have been bribery problems overseas. The SEC has begun to investigate Avon.
A new CEO, Sherilyn McCoy, formerly of Johnson & Johnson (NYSE: JNJ), has been appointed by the Avon board. That should not stop the board from saving the company and preventing a sharp drop in its stock if Coty is rejected. Avon has no viable turnaround plan, and, in the best case, it will take quarters for McCoy to implement one if she can at all.
Douglas A. McIntyre