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A feisty fragrance company has forced its foot into Avon’s front door, and the struggling cosmetics giant will have trouble closing it again.
Coty — a private New York company that makes scents for designers ranging from Calvin Klein to Vera Wang — yesterday made an unsolicited offer to take Avon private for $10 billion, or $23.25 a share — a 20-percent premium to Avon’s stock price.
Shares of Avon — whose stock lately has been hammered by poor financial results and probes into its accounting and alleged bribes to foreign officials — surged $3.34, or 17.3 percent, to $22.70.
Avon promptly rejected the offer, and Coty insisted its approach was friendly.
Nevertheless, Coty disclosed it had been in merger talks with Avon for months, having originally floated the idea of selling itself to Avon, creating a merged public company.
“We’ve been interacting with them and getting nowhere,” Coty Chairman Bart Becht said, noting that three of Coty’s letters to Avon have recently gone unanswered. “We’ve made a public announcement because we are hopeful their shareholders will talk to the board.”
While Coty’s business is less than half the size of Avon’s, a financing package is being arranged by JPMorgan and Blackstone, as well as Bryan Trott, a Goldman Sachs veteran who is also known as the favorite investment banker of Warren Buffett.
Avon, which is being represented by Goldman Sachs and Centerview Partners, quickly rebuffed the going-private deal.
But it mainly complained about the price, which was 10 percent below where the stock was just months ago.
Coty signaled it would consider raising its bid if Avon opened its books.
Investors likewise speculated that the news opens Avon to offers from other rivals, including L’Oreal and Procter & Gamble, both of which are rumored to have circled Avon in the past.
Coty — which is looking to use Avon’s global sales force to hawk its fragrances and skin-care products in new markets such as China and Brazil — is hungry for a deal despite the fact that Avon is searching for a new CEO after a slew of gaffes sidelined longtime chief Andrea Jung.
Avon said yesterday it is getting closer to finding Jung’s replacement — a move that Becht countered would “not be helpful” for closing a deal.
“We are committed to hiring a new CEO and executing against what the company believes are its strong long-term prospects,” Avon spokeswoman Jennifer Dwyer Vargas said.
“The board has been clear that with a new CEO, it believes there will be greater opportunity to improve shareholder value.”
Coty has grown quickly with a shrewd acquisition strategy under Becht, who previously won praise for jumpstarting growth at personal-care brand Reckitt which, like Coty, is controlled by the Benckhiser family.
Coty’s bid for Avon will include billions of dollars in equity, partly provided by the Benckhisers, as it is determined to keep the combined company’s debt at investment-grade levels.