Avon lady spurns her $10bn suitor

COSMETICS giant Avon has shunned a $10bn offer from its upstart European rival Coty, it emerged yesterday.

The world’s biggest direct sales company, which is famous for its army of door-to-door sales representatives known as Avon Ladies, dismissed the offer as “opportunistic” after Coty revealed that it had been trying to lure the board into talks for months.

But although Coty, the celebrity-branded perfume-maker chaired by former Reckitt Benckiser boss Bart Becht, provocatively informed the market that its offer letters had gone ignored, it insisted that it is not interested in making a hostile bid.

Becht said in his letter to Avon’s management: “We do not understand how your board’s unwillingness to discuss our proposal can serve the best interests of Avon’s shareholders.”

While the $23.25-per-share offer gives a 20 per cent premium to Avon’s share price on Friday, it is still well under its value a year ago. Coty has already raised its offer once and could do so again, but analysts say it is unlikely to reach the $35 level the stock has hit in recent years.

That is because Avon has been beset by problems, from stagnating sales in emerging markets to questions over its process for choosing a new chief and an investigation for allegedly breaking US bribery laws in China.

It has also seen its sales decline in the US and is struggling to hold onto sales representatives – mostly women who earn a commission from selling its products and hiring new recruits.

Avon would nonetheless provide its smaller rival Coty with a huge boost in its exposure to emerging economies. And Coty insists that it would not have trouble funding the $10bn acquisition, despite being less than half the size of its target by revenues.

A successful deal would also mark a dramatic return to empire-building for Coty chairman Becht, who is well-known in the City for his success at turning household goods-maker Reckitt Benckiser into a £26bn behemoth and for pocketing a huge pay package in return. The Benckiser family is also a big investor in privately owned Coty, whose products include Madonna- and Adidas-branded fragrances.

Avon is still on the hunt for a new chief exec to replace Andrea Jung, but critics say the search is being hampered by the board’s decision to keep Jung on as company chairwoman.