Avon Products Inc said Cerberus Capital Management LP would take a 16.6 percent stake in the company and buy 80.1 percent of its North American business, in a $605 million deal that throws a lifeline to the struggling cosmetics maker.

Cerberus will invest $435 million for its stake in Avon, valuing the pioneer direct-selling company at about $2.6 billion - a far cry from the $10.7 billion takeover offer from Coty Inc that Avon rejected in 2012.

The New York based hedge fund will pay $170 million to take control of the North American business, which accounted for about 14 percent of Avon's total revenue in the latest quarter.

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The deal comes after investors led by Barington Capital proposed a restructuring of Avon, while warning against the rumored sale of its North American arm to Cerberus.

Barington did not immediately respond to requests for comment.

The North American business will be separated into a privately held company that will assume about $230 million of long-term debt from Avon, partly offset by a $100 million cash contribution from the cosmetics maker.

Avon - known for the catchphrase "Ding-dong; Avon calling" - will hold 19.9 percent of the new company.

Avon, whose shares were up 14 percent in early trading, will appoint three Cerberus members to its board, including Chan Galbato, who will be a non-executive chairman.

Douglas Conant will step down as Avon's chairman along with five other board members after the transaction closes.

The statement from Avon and Cerberus did not mention any change to the position of Chief Executive Sheri McCoy.

The Wall Street Journal first reported that Cerberus was close to striking a deal with Avon.

Avon, which started selling perfumes door-to-door in 1886, said it would suspend its quarterly dividend to reinvest in its business.

Avon has been struggling to reverse a near four-year decline in sales, mainly due to weak demand in Latin America, its biggest market.

Sales in North America have also fallen for more than three years as the company faces intense competition from online and big-box retailers as well as niche cosmetics makers offering more exclusive brands.

Up to Wednesday's close of $4.09, Avon's stock had risen nearly 10 pct since Dec. 2, the day before Barington Capital sent a letter to Avon urging the company to restructure.