Struggling Avon rejects $10 billion takeover

Eric Thayer / REUTERS

By msnbc.com staff

Coty, a leading global beauty company, said Monday it has made an offer to buy struggling cosmetics company Avon Products in a deal valued at approximately $10 billion.

The offer, of $23.25 per share in cash, represents a premium of 20 percent over the closing level of Avon shares last Friday. Shares of Avon surged on the news in trading Monday.

Avon said Monday it has carefully considered the offer, but has rejected it, calling it ?opportunistic? and ?not in the best interest of Avon?s shareholders.?

Linda Bolton Weiser, an analyst at Caris & Company, told CNBC Monday the bid might end up being a positive for Avon, as it implies that the company?s direct-seller model of retailing is still relevant.

Coty said it decided to make the transaction public ?in order to inform Avon's shareholders of the significant value in a transaction.? Coty added ?it has no intention of pursuing an acquisition on a hostile basis.?

?Our objective is to engage in discussions with Avon and conduct due diligence so that we and Avon can together determine if there is a basis for a transaction,? Bart Becht, Chairman of the Board of Directors of Coty, said in a statement.

?We believe Avon?s shareholders would want their Board to explore with us the benefits to shareholders of a transaction,? Brecht said.

Becht detailed the details of the deal in a letter to Avon's board of directors.

Coty said it has held extensive discussions with its financing sources about obtaining the debt and equity financing necessary to complete the transaction, and is confident it will obtain the necessary financing for the transaction.

Known in the U.S. for its ?Avon ladies,? who sell Avon?s products door to door and to friends and family, Avon has struggled in recent years, turning in poor performances in key markets such as Brazil and Russia.

The company has also suffered from a leadership vacuum.

Avon said late last year it has begun a search to replace?chief executive Andrea Jung, who will remain as?chairman. Jung has attracted the ire of investors because of slumping sales and a federal?probe about whether the company broke bribery laws overseas.

Related:

Avon?s Andrea Jung loses CEO title

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