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Industry speculates Coty may put Avon offer back on the table

By Michelle Yeomans , 19-Dec-2012
Last updated on 03-May-2013 at 11:04 GMT2013-05-03T11:04:50Z

As December rounds off what has been a tough year for Avon between declining sales and shares, bribery investigations and its CEO stepping down, media reports speculate that Coty may bring its acquisition offer to the table once more. 

Amidst the rumors, journalists at ‘The Motley Fool’, a multimedia financial-services company, have been reporting that Coty may be interested again after its initial buyout offer of more than $24 a share was turned down back in April, shares which were priced at less than $14 yesterday.  

The fragrance giant has made numerous attempts in the past to engage Avon in discussions regarding its proposal, all of which were unsuccessful, prompting the company to make its proposal public back in April in an attempt to show Avon's shareholders there is value in a transaction.

On contacting Coty representatives about the most recent speculation they informed CosmeticsDesign.com USA that; “Coty does not comment on rumours or speculation in the marketplace.”

What if?

According to some, if Coty were to come back with say the same offer of $24.75 per share, it will be more than a 75 percent premium to the last closing price.

This should give management a huge incentive to sell off their positions and honorably retire. Yet another way could be an open tender offer by Coty to Avon's shareholders,” 'The Motley Fool' reckoned.

Other reports estimate that a potential deal would give Avon’s reportedly struggling fragrance portfolio a boost due to Coty’s successful fragrance brands, whilst Coty would benefit from Avon's more developed skincare and makeup line.

Avon: offer ‘substantially undervalues’ the company 

Back in April, a letter was sent to current Avon CEO Andrea Jung, detailing Coty’s offer to acquire the company that also stated: "We do not understand how your Board's unwillingness to discuss our proposal can serve the best interests of Avon's shareholders.”

However, that is exactly how Avon felt as it responded to the offer, branding Coty’s attempts as ‘opportunistic’.

“The Avon Board believes Coty's indication of interest, which offers Avon shareholders only a 20 percent premium over the Company's closing share price on March 30, 2012, does not reflect the fundamental value of Avon and its global beauty care franchise.”

Then, under the circumstances, Avon's Board was convinced that rejecting Coty's indication of interest was in its' shareholders' best interests, although Coty had suggested it could be back with another offer.

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