Avon facing reality that it may sell for half its' worth

By Michelle Yeomans contact

- Last updated on GMT

Avon facing reality that it may sell for half its' worth
Despite Avon’s stocks rising of late, the brand’s current trading price is fuelling rumours of a potential deal with private-equity firm TPG, which could see it go for half its worth.

Speculation that the global cosmetics brand may be willing to take such a hit comes as a surprise to industry analysts, as Avon had rejected perfume maker Coty’s offer to acquire the brand for $10.7bn back in 2012.

Currently, Avon shares stand between $7-15, whereas Coty was willing to pay $24.75 two years ago.

This means that even if a potential buyer paid a 50% premium to Avon’s current trading price, the buyer would get the company for roughly half of what Coty had put on the table in 2012.

It's been a tough road for Avon..

Sales figures began to noticeably drop in January 2013 as Avon announced its’ vice chairman Charles Cramb had been fired following on-going investigations into bribery centred on its China operations.

The internal investigations go back as far as June 2008, with efforts to establish whether or not officials at the company have violated the Foreign Corrupt Practices Act​ remaining ongoing.

Between March and May of 2012, Coty made two unsolicited bids for the troubled giant, firstly at $10bn before upping the offer to $10.7bn, to which Avon rejected the first time claiming that its rival had ‘substantially undervalued’ it and was reported to have ‘ignored’ the second time.

"Two months is enough,"​ said Coty chairman Bart Becht at the time.

In a letter sent to Avon, Becht said; "your total lack of engagement with us leads us to believe that you remain reluctant to explore a friendly, negotiated combination on a reasonable timetable. Consequently, as our deadline to begin discussions expired today, our proposal is withdrawn."

By April '13, Andrea Jung had announced she was stepping down as executive chairman and board member, who was then replaced by Sherilyn S. McCoy​, formerly of Johnson & Johnson. The move had some in the industry concerned regarding McCoy's lack of experience in running a public corporation.

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