Two weeks ago Coty Inc. sent a proposition to purchase Avon for $10 billion cash. One giant is trying to eat the other. Avon refused the proposition as it was officially declared by Avon’s spokesperson: “At the time, the board concluded, and it still believes, that Coty’s indication of interest is opportunistic and not in the best interest of Avon’s shareholders“.
Coty decided to make the offer public as they think it would be at the interest of Avon’s shareholders. A complex matter that brings Avon into a hard decision as the company’s results are not at their best. Avon’s CEO Andrea Jung, is supposed to find her replacement after a drop down of 40% in terms of results. So by proposing a +20% higher than the normal price per share, Coty tries to convince Avon’s shareholders to sell.
Why Coty would like to buy Avon? I think their strategy is pretty clear. By purchasing Avon, Coty opens a new distribution channel for its own Brands: door-to-door. Coty belongs to the largest shareholder in Europe consumer-products maker Reckitt Benckiser Group Pic. With this acquisition, they expect to double their annual $4.5 billion sales.
Coty is a giant in the Cosmetic and Beauty industry. Founded by legendary François Coty (said to be the father of Modern Perfumery) in 1904, it became a huge multinational company owning multiple licenses for worldwide Brands such as David & Victoria Beckham, Beyonce, Celine Dion but also Calvin Klein and Marc Jacobs. Coty also signed a huge contract with Lady Gaga and Madonna. A lot of Brands and a saturated distribution. If the deal with Avon is concluded, Coty will open new market opportunities, especially in regions like Latin America where Avon is strong. In the past decade, the Beauty industry got more than 300 main takeovers which makes it more and more concentrated industry. If Coty succeeds to buy Avon, it will become the number one company in front of Procter&Gamble in terms of sales.
Beauty has a price and we already knew it.
Info sourced at blomberg.com, nzz.ch, WWD and luxurydailynews.com. All images are copyrighted with no reproduction rights available.