NEW YORK, April 2, 2012 /PRNewswire/ -- Coty Inc., a
leading global beauty company, today announced that it has
submitted a non-binding proposal to acquire Avon Products, Inc.
(NYSE: AVP) for $23.25 per share in
cash in a mutually agreeable and negotiated transaction. The
proposal, valued at approximately $10
billion, represents a very substantial premium of 27% over
the three month volume-weighted average price for Avon shares. Coty has held extensive
discussions with its financing sources about obtaining the debt and
equity financing necessary to complete this transaction, and is
confident that such financing will be available.
Following extensive but unsuccessful attempts to engage
Avon in discussions regarding its
proposal, Coty has decided to make its proposal public in order to
inform Avon's shareholders of the
significant value in a transaction. Coty said 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. We believe Avon's shareholders would want their Board to
explore with us the benefits to shareholders of a transaction,"
said Mr. Bart Becht, Chairman of the
Board of Directors of Coty.
In a letter to Avon's Board of
Directors, Mr. Becht detailed the compelling strategic and
financial benefits of this combination:
- The combination would create an iconic beauty company and
strengthen its position as a global leader in the beauty
industry.
- The combination will create new growth opportunities and
benefit consumers by providing greater access to innovative,
quality and branded beauty products across multiple distribution
channels.
- Coty believes that its proposed price is a full and fair one,
based on public information about Avon, and it is prepared to consider
increasing its price if Avon can
demonstrate through diligence that there is greater value.
- BDT & Company, LLC is arranging equity financing from the
Joh. A Benckiser companies and BDT Capital Partners along with
selected Limited Partners in the BDT Capital Funds. J.P.
Morgan Securities LLC is arranging the debt financing.
- Coty has committed to reinvesting a material part of the cost
synergies of the combination to address Avon's operational issues and drive future
growth.
- The combined company would draw on the strength and depth of
Avon's team to enhance Coty's
experienced and highly successful leadership team.
- Coty anticipates being able, with Avon's cooperation, to complete due diligence
quickly and move forward with a mutually agreeable
transaction.
A copy of the letter being delivered by Coty to Avon this morning follows below:
April 2,
2012
Andrea Jung, Chairman and Chief
Executive Officer
Avon Products, Inc.
1345 Avenue of the Americas
New York, NY 10105
Dear Andrea:
In letters on March 7,
March 19 and March 30, 2012, we made what we believe to be
compelling proposals to acquire Avon Products, Inc. ("Avon") in a transaction that would provide
full value to your shareholders. We were surprised and
disappointed that Avon's Board of
Directors has no interest in a discussion to explore our
acquisition proposal. We are confident your shareholders
would want the Board to at least explore with us the possibility of
such a compelling transaction. We, therefore, have decided to
make our proposal public so that your shareholders have an
opportunity to voice their views as to whether Avon's Board should engage in discussions with
us regarding our proposal.
We remain interested in pursuing discussions in a mutually
agreeable and negotiated manner, and have no intention of pursuing
our proposal on a hostile basis.
Background on Coty
Coty is a global leader in Beauty with $4.5 billion in net annual revenues. Its
products are sold through traditional retail as well as prestige
distribution channels. It is a global leader in Fragrances
and Nail Products and is also an emerging leader in Color with a
strong platform in Skin & Body Products. Coty has a world
class portfolio of brands in these categories such as Calvin Klein, Chloe, Marc Jacobs, Davidoff, Philosophy, OPI, Playboy,
Sally Hansen, Adidas and Rimmel.
Coty has grown net revenues on a like for like basis at 7% over
the last two years driven by its superior innovation, branding and
execution capabilities that excites consumers. This
growth was achieved despite the fact it derives only 26% of its
revenues from emerging markets. Coty has a track record of
strong financial performance with EBITDA margins expanding by 300
basis points over the past two years to a 17% margin.
Rationale for the Combination
The combination would create a new strong company in Beauty to
be called "Avon– Coty." It will be focused on providing
consumers and account representatives innovative, quality and
branded beauty products across distribution channels. The
scale and complementary category and distribution strengths of the
combined business as well as reinvestment of cost synergies will
establish a platform for healthy, stronger, sustainable and
profitable growth for "Avon –
Coty" and its account representatives and business partners.
The combined company will benefit from complementary category
strengths. Coty is an innovation leader in Fragrances and Nail
Products, while Avon has more core
strength in Color and Skin and Body Products. Coty's approach
to innovation, branding and execution will be used and targeted to
deliver innovative and quality products across all Beauty
categories for "Avon –
Coty." The Coty Board is committed to reinvest cost synergies
realized from the combination, to ensure the new company will
deliver on its promise of more innovative and quality products
across the various Beauty segments.
Avon has a strong presence in
emerging markets with over 68% of its revenues coming from these
markets. Many of the Beauty categories in these markets are
dominated by "door to door" distribution. While many of
Coty's brands already have good levels of awareness in many of
these markets, they are not widely available for sale at this point
in time due to lack of Coty infrastructure. Distribution of
appealing Coty mass beauty brands via Avon's "door to door" distribution channel
will therefore create new and attractive growth and earnings
opportunities for "Avon – Coty"
and its 6.4 million account representatives.
The Coty Board believes that a very material part of the cost
synergies realized from combining the two businesses would have to
be reinvested to address Avon's
operational issues and drive growth and earnings for "Avon – Coty" and its account representatives.
While due diligence will fine tune Coty's perspective, it is
expected that reinvestment will principally focus on improving
supply service levels, delivering better and more innovative
products, improving systems and enhancing programs for and support
to account representatives.
To ensure the success of the combination, the Coty Board is
strongly committed to drawing on the strength and depth of the
teams at both Avon and Coty.
Based on the foregoing, the Coty Board believes a new iconic
Beauty company can and should be created because of its clear
benefits to consumers, account representatives, employees and
shareholders.
Our Proposal
To reiterate the terms of our proposal, we have submitted a
non-binding indication of interest to acquire all of the
outstanding shares of common stock of Avon at a price of $23.25 per share in cash in a mutually agreeable
and negotiated transaction (such non-binding indication of
interest, the "proposal"). As you know, this price was
increased from our initial indication of interest on March 7th
of $22.25 per share to be responsive
to the Avon Board's indication
that such price was not sufficient to discuss a combination.
Our proposal of $23.25 per share
represents a very substantial premium of 27% over the three month
volume weighted average price for Avon shares.
We do not understand how your Board's unwillingness to discuss
our proposal can serve the best interests of Avon's shareholders. In rejecting our
request for discussions you have referred, among other things, to
questions your Board has about value. We believe, based on an
extensive review of public information about Avon, that our proposed purchase price is a
full and fair one. As we have indicated to you, if
Avon's Board does not believe that
our proposal represents attractive value, we would think it would
be a better course for you to provide us with access to non-public
information so that you can explain where you see greater
value. If you can demonstrate that there is greater value
than is apparent from publicly available information, we would be
prepared to consider increasing the price of our proposal. At
the same time, as I am sure you can appreciate, we will need to
conduct due diligence to confirm the reasonableness of our
$23.25 per share proposal.
Financing
We were also surprised that you cited as one of your reasons for
refusing to discuss our proposal the purported "uncertainty" of our
proposal. We offered on several occasions to have you and
your advisors speak with our equity and debt financing sources so
that you would understand how confident we are that we can finance
a transaction. We are concerned that you would make a
determination about financing without making any serious inquiry
about the status of our financing.
As we have discussed and reiterated in our March 19th letter, we are confident in our
ability to fully finance a mutually agreeable and negotiated
transaction. We have worked extensively with BDT &
Company, LLC ("BDT") to arrange equity financing, which will be
provided by the Joh. A Benckiser companies and BDT Capital
Partners, along with selected Limited Partners in the BDT Capital
Funds. We have also worked extensively with J.P. Morgan
Securities LLC ("JPMorgan") to obtain debt financing for the
transaction. Our discussions and the significant work BDT and
JPMorgan have done to date give us confidence that all such
financing is readily available.
Both BDT and JPMorgan remain available to discuss our financing
and we again encourage you to speak with them before making any
determination about our ability to obtain financing.
Transaction Process and Timing
Our internal transaction team, BDT and JPMorgan have already
completed extensive analysis and due diligence on Avon based on publicly available
information. As we have indicated, we believe that with your
cooperation, we can together determine within a short period of
time whether there is a basis for a transaction and negotiate
definitive transaction agreements.
Given the short period of time involved, our proposal would not
interfere with your CEO search. However, we would expect that
you would not hire a new CEO while we are jointly pursuing this
compelling proposal.
In addition to BDT and JPMorgan, we are being advised by
Blackstone Advisory Partners L.P. and we are working with Skadden,
Arps, Slate, Meagher & Flom LLP as legal advisor. We, our
advisors and financing sources are prepared to work with you and
your advisors to endeavor to finalize a transaction.
The submission of this proposal has the full support of our
Board and our shareholders. Based on our initial review, we
believe that the proposed combination should not encounter any
significant regulatory issues.
This letter and our proposal constitute a preliminary,
non-binding indication of interest to acquire the outstanding
shares of Avon, and our proposal is being submitted based on the
understanding that it is not an offer that is capable of being
accepted and that there will be no binding agreement between us or
any commitment or obligation on either party with respect to the
proposal or a possible transaction unless and until a definitive
agreement is executed by Avon and
Coty. We reserve the right to discontinue discussions
regarding, and withdraw, our proposal at any time. Our
proposal is subject to customary conditions, including, among other
things, our satisfaction with the results of due diligence in our
sole discretion, the negotiation of a mutually satisfactory
definitive agreement, completion of financing and the approval of
the negotiated terms of a transaction by our Board of
Directors.
Given our willingness to propose a purchase price at an
attractive premium, and given the substantial uncertainties
concerning Avon's business and
liabilities, we believe it is very much in your shareholders' best
interests for you to start a dialogue with us about our proposal
and provide us with access to the relevant company
information. If you are going to foreclose this opportunity
for your shareholders, we would hope that you would do so on an
informed basis.
We look forward to discussing this transaction further with
you.
With best regards,
Bart Becht
About Coty Inc.
Coty was created in Paris in 1904
by Francois Coty, who is credited
with founding the modern fragrance industry.
Today Coty Inc. is a recognized leader in global beauty with
annual net sales of $4.5 billion.
Driven by an entrepreneurial spirit, passion, innovation and
creativity, Coty Inc. has developed an unrivaled portfolio of
notable brands and delivers its innovative products to consumers in
135 markets worldwide.
The Coty Prestige brand portfolio is distributed
in prestige and ultra-prestige stores and includes Balenciaga,
Bottega Veneta, Calvin Klein,
Cerruti, Chloe, Chopard, Davidoff, Jennifer
Lopez, Jil Sander, JOOP!,
Karl Lagerfeld, Kenneth Cole, Gwen
Stefani, Lancaster,
Marc Jacobs, Nikos, philosophy,
Roberto Cavalli, Sarah Jessica Parker, Truth or Dare by Madonna,
Vera Wang, Vivienne Westwood and Wolfgang Joop.
The Coty Beauty brand portfolio is more widely
distributed and includes adidas, ASTOR, Beyonce Knowles, Celine
Dion, David and Victoria
Beckham, Elite Models, Esprit, Exclamation, Faith Hill, GUESS?, Halle Berry, Heidi
Klum, Jovan, Kate Moss,
Kylie Minogue, Lady Gaga,
Manhattan, Manhattan Clearface,
Miss Sporty, Nautica, N.Y.C. New York Color, Nicole by OPI, OPI,
Pierre Cardin¹, Playboy, Rimmel, Sally
Hansen, Stetson, Tim McGraw,
TJoy and Tonino
Lamborghini.
Coty and Puig S.L. have a
strategic partnership for the distribution of the perfume lines of
Antonio Banderas, Carolina Herrera, Nina
Ricci, Paco Rabanne, Prada, Shakira and Valentino
in the United States and
Canada.
Additional Information
This communication does not constitute an offer to buy or
solicitation of an offer to sell any securities. No tender
offer for the shares of Avon Products, Inc. has been commenced at
this time and Coty Inc. has not indicated any intent to do so.
SOURCE Coty Inc.