SHARES IN Avon Products, the world’s largest door-to-door cosmetics seller, fell the most in more than six months after Coty withdrew its $10.7 billion offer.
Avon slid 11 per cent to $18.68 in New York in morning trade, the biggest decline in the Standard Poor’s 500 index. The shares earlier fell 14 per cent for the largest intraday drop since last October.
The stock had gained 20 per cent this year before yesterday.
Coty, the maker of perfumes by singer Beyonce and supermodel Heidi Klum, said attempts to speak to Avon board members, including chairwoman Andrea Jung and chief executive officer Sheri McCoy, failed after it received a two-sentence email requesting a deadline extension.
Coty had given Monday as a cut-off date for a response when it made its $24.75-a-share bid last week. “This continued delay and unwillingness to engage in discussions is disappointing,” Coty chairman Bart Becht said in a letter to Avon’s board. “It is time for Coty to move on and pursue other opportunities.”
Avon, which rejected an initial $10 billion offer last month, had asked for another week to consider the higher bid as the deadline for an answer expired. Coty said it had equity commitments for the bid of more than $5.8 billion from Joh A Benckiser, BDT Capital Partners and Warren Buffett’s Berkshire Hathaway with debt financing to be provided by JPMorgan Chase.
“Your total lack of engagement with us leads us to believe that you remain reluctant to explore a friendly, negotiated combination,” Mr Becht said.
Avon, in a separate statement, confirmed that Coty had withdrawn its proposal. The company said it responded “promptly” to Coty’s letter of May 9th by disclosing it and indicating the board would consider the contents. “Five days after sending its letter, Coty withdrew its proposal,” Avon said.
Mr Becht targeted Avon to add a door-to-door distribution channel for Coty’s cosmetics and more than double its $4.5 billion in annual sales from brands including Calvin Klein, Cerruti, Marc Jacobs and Wolfgang Joop.
“The Avon bid was uncharacteristic for Coty, and I imagine Coty’s feeling a bit bruised,” said Vivienne Rudd, an analyst at Mintel International. – (Bloomberg)
