Coty Raises Offer for Avon (AVP)

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Cosmetics maker Coty Inc. has today raised its offer for Avon Products Inc. (NYSE: AVP) to $24.75/share, up another $1.50/share from its original offer. In a letter to the Avon board, Coty’s CEO notes that the latest offer represents a premium of 36% to Avon’s closing price before the initial offer, “despite a materially weakened outlook for [Avon’s] business.”

The offer is contingent on Avon’s willingness to allow Coty to conduct due diligence:

We need to confirm our synergy estimates, the availability of which will be critical to our final valuation and the reinvestment required to implement a turnaround of Avon. In particular, we are very interested in understanding the components of your SG&A expense line item as we evaluate how to increase economic opportunities for your representatives relative to controlling overall corporate spending. We also need to better understand your ongoing Foreign Corrupt Practices Act investigation and litigation, and what it will cost to address operational and financial problems and these liabilities.

Coty’s offer is good until Monday, May 14th, at which time Coty will withdraw its proposal. If Avon does not respond by that date, Coty “will have to inform the public markets of the circumstances of our withdrawal.”

Avon’s shares are up about 3% in pre-market trading at $22.15 in a 52-week range of $16.09-$30.62, indicating, perhaps, that investors don’t think that Avon will agree.

Paul Ausick