Ding-dong: Cerberus comes calling at Avon with $605 million investment

Thu Dec 17, 2015 11:52am EST
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By Yashaswini Swamynathan

(Reuters) - Avon Products Inc said Cerberus Capital Management LP would take a 16.6 percent stake in the company and buy 80.1 percent of its North American business, in a $605 million deal that throws a lifeline to the struggling cosmetics maker.

Cerberus will invest $435 million for its stake in Avon, valuing the pioneer direct-selling company at about $2.6 billion - a far cry from the $10.7 billion takeover offer from Coty Inc that Avon rejected in 2012.

The New York-based hedge fund will pay $170 million to take control of the North American business, which accounted for about 14 percent of Avon's total revenue in the latest quarter.

The deal comes after investors led by Barington Capital proposed a restructuring of Avon, while warning against the rumored sale of its North American arm to Cerberus.

Barington had also campaigned for the removal of Avon Chief Executive Sheri McCoy.

She will stay on, while six directors including Chairman Douglas Conant will step down once the deal closes.

"While we are pleased that six existing board members have agreed to step down, we are astonished that Sheri McCoy remains as CEO," Barington Chief Executive James Mitarotonda said in an email. "We intend to explore all available options."

Avon's board had sold at "fire sale prices," he said.   Continued...

The Avon Products headquarters is seen in midtown Manhattan area of New York, in this June 21, 2013 file photo. REUTERS/Brendan McDermid