Avon went door-to-door to sell 80% of the biz
Steve’s breakdown: That’s quite a cash infusion but who knows what the buyer is going to do with all that “Avon”. I say let’s blow this brand up with some relevant marketing. I know you do too so get in there!
NEW YORK, NY: Avon, the nearly 130-year-old cosmetics company that got its start peddling perfumes door-to-door, is selling the majority of its North American business.
The New York-based company said Thursday that buyout giant Cerberus Capital Management is taking an 80 percent stake in the business in exchange for a $170 million equity investment.
The company has been in talks with private-equity firms for months about an investment after failing to find a buyer for the whole company.
“After a thorough, thoughtful and deliberate process by both parties, we are creating a strategic partnership that will improve Avon’s performance and drive shareholder value,” Avon CEO Sheri McCoy said in a statement.
Avon has been mired in a four-year sales slump and is losing money. The stock is down nearly 90 percent since its high in 2004.
The company had a chance to sell itself three years ago but fragrance maker Coty withdrew its $10.7 billion offer after Avon blew a deadline to discuss a deal.
Long the subject of buyout rumors, the company was also the victim of a hoax, when a phony firm, called PTG Capital, claimed to have made a takeover offer. The Securities and Exchange Commission later charged a Bulgarian trader, Nedko Nedev, with orchestrating the scheme.
The faded American icon, founded by traveling book salesman David McConnell in 1886, still relies on a network of sales reps to hawk its beauty products and has been slow to adapt to the Internet and other changing shopping habits.
The North American unit will be separated from Avon Products into a privately-held company that will be managed by Cerberus.
The private-equity firm will also make a $435 million investment for a minority stake in parent Avon Products, in the form of convertible preferred shares with a conversion price of $5 a piece.
Shares of Avon were up 10 percent, to $4.50, on the deal announced Thursday morning.
Avon’s board has approved the deal, which is expected to be completed in the spring.
The company also announced it is suspending its quarterly dividend starting next year.