Coty to start selling Avon shareholders on deal
Privately held Coty, the company behind fragrances for such stars as Lady Gaga, earlier this week offered to buy Avon, which is facing declining sales in key markets like Brazil as well as a bribery probe, for $23.25 a share. That is a 20 percent premium over Avon's stock price before the proposal was made public.
Avon's largest shareholders are T. Rowe Price Associates Inc, with a 7.6 percent stake, Capital Research Global Investors with 6.5 percent, Invesco Advisers Inc with 5.2 percent, and Vanguard Group Inc with 4.9 percent, according to Thomson Reuters data.
Coty went public with its unsolicited proposal on Monday to put pressure on Avon, which it said was unwilling to negotiate a deal. But it also said on Monday that it had no intention of pursuing a hostile offer for Avon.
Doing so would prevent it from getting access to Avon's books to better ascertain the potential hit to Avon's value of an ongoing U.S. government probe into whether Avon broke anti-bribery laws overseas, and to get a better handle on the extent of Avon's operational problems, among other issues, the sources said.
A Coty representative declined to comment.
Coty said Monday it was open to raising its offer after that due diligence.
Avon saw sales rise only 1 percent, excluding the impact of currency, in 2011 and sold 2 percent fewer items. In its home U.S. market, it continued to lose sales and representatives.
Avon, in rejecting Coty's bid on Monday, said the bid "substantially undervalues" the company and that it is better off on its own to improve its business.
The total check to finance the deal will be roughly $14 billion, which includes $2 billion of Coty's debt and $2 billion of Avon debt, the sources said.
Coty said on Monday it was confident it could line up the financing it needs.
Buying Avon would give Coty a bigger presence in emerging markets like Latin America and expand its cosmetics and skin care offerings.
Avon's annual shareholder meeting is scheduled to take place on May 3 in New York.
Avon shares were up 1.9 percent at $23.19 on Thursday afternoon.
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