NEW YORK, May 10, 2012 /PRNewswire/ -- Avon Products,
Inc. (NYSE: AVP) received a letter from Coty Inc., dated
May 9, 2012, which is attached
below. Avon's Board of
Directors will consider the letter in due course.
Avon, the company for women, is
a leading global beauty company, with over $11 billion in annual revenue. As the
world's largest direct seller, Avon markets to women in more than 100
countries through approximately 6.4 million active independent Avon
Sales Representatives. Avon's product line includes beauty
products, as well as fashion and home products, and features such
well-recognized brand names as Avon Color, ANEW, Skin-So-Soft,
Advance Techniques, Avon Naturals, and mark. Learn
more about Avon and its products
at www.avoncompany.com.
LETTER FROM COTY INC.
Board of Directors of Avon Products, Inc.
1345 A venue of the Americas
New York, NY 10105
Dear Members of the Board:
Since we made public our non-binding proposal to acquire
Avon for cash (the "proposal")
more than a month ago, we have spent significant time listening to
your shareholders and analyzing public information, including your
most recent quarterly results. We continue to believe that our
proposal would provide compelling value to Avon's shareholders relative to a difficult
and uncertain multi-year turnaround on a stand-alone basis. The
combination of Avon and Coty would
create a global beauty company with broader innovation, branding
and execution capabilities to benefit its customers,
representatives and associates around the world.
We have been disappointed by the current stalemate. As you know,
we contacted Avon last week in an
effort to break this deadlock. We indicated that we were prepared
to engage in non-public discussions and discuss an increase to our
proposal of $23.25 if substantiated
through a three-week diligence process.
We remain keenly focused on understanding Avon's operational and financial challenges,
evidenced by your disappointing first quarter results and outlook,
as well as your recent credit ratings downgrades. We need to
confirm our synergy estimates, the availability of which will be
critical to our final valuation and the reinvestment required to
implement a turnaround of Avon. In
particular, we are very interested in understanding the components
of your SG&A expense line item as we evaluate how to increase
economic opportunities for your representatives relative to
controlling overall corporate spending. We also need to better
understand your ongoing Foreign Corrupt Practices Act investigation
and litigation, and what it will cost to address operational and
financial problems and these liabilities.
We are prepared to sign a confidentiality agreement with
standstill provisions that would restrict us from taking further
public steps in seeking to acquire Avon so long as you agree in good faith to
provide us with requested information on a timely basis. As we have
consistently indicated, we and our financing partners will only
pursue this proposal on a consensual basis, including having
conducted due diligence. Our equity financing sources will include
our principal shareholder Joh. A. Benckiser, BOT Capital Partners
and certain of its limited partners, and Berkshire Hathaway Inc.
Our debt financing will be provided by JPMorgan Securities.
Upon signing the confidentiality agreement, we anticipate we
would need only several weeks to conduct expedited due diligence of
Avon and finalize the terms of a
possible transaction. We have attached to this letter a list of
priority diligence items that we believe would enable us to form a
definitive view of value beyond where we have arrived based on
public information.
When we contacted you again last week, you advised us that
Avon's Board of Directors was not
prepared to engage in any discussions regarding any revised
proposal until Avon had completed
a strategic and operational internal review with its new CEO. While
we understand Avon's interest in
conducting such a review given the significant challenges and
uncertainties described in your recent analyst call, this review
can and should be done in parallel with exploring the strategic
alternative of selling the company so the Board may compare both
proposals side by side and make the right choice for Avon shareholders.
In any event, we will not keep our proposal open for the several
months that you say you need to conduct your internal review. We
and our equity sources are prepared to work until May 31, 2012 to see if we have a mutually
agreeable basis for a transaction. If you are prepared to
enter into discussions, we can, prior to this expiration date,
determine whether there is an opportunity to provide significant
and certain immediate value to Avon's shareholders.
In our final effort to move forward with discussions, we are
revising our proposal to $24.75
subject to due diligence and the other conditions described below.
This price represents a premium of over 36% to the original
undisturbed closing price on March 6,
2012 before our initial proposal of$22.25 and also
represents over $1 billion of
incremental value to your shareholders, despite a materially
weakened outlook for your business. Given the challenges facing
your business, we believe the premium is even higher when
considering your potential stock price in the absence of a possible
transaction. If in our work we find considerably more positives
than negatives, we would be prepared to propose a higher price; if
we find more negatives than positives, it would be difficult to
justify our revised proposal. If after due diligence our final
proposal were to be unacceptable to you, we will simply indicate so
in a mutually agreeable statement and part company as friends.
In order to end the uncertainty around this transaction for both
your organization and ours, we request that you respond to our
revised proposal by close of business on Monday, May 14th. If you choose not to engage
with us, we will withdraw our proposal. Our intention is to submit
this letter and our revised proposal to Avon's Board on a confidential basis. However,
if you do not enter into discussions with us by May 14th, we will have to inform the public
markets of the circumstances of our withdrawal.
This letter and our proposal and revised proposal constitute a
preliminary, non-binding indication of interest to acquire the
outstanding shares of Avon, and our revised 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 revised 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
revised proposal at any time. Our revised 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, financing and the approval of the negotiated terms of a
transaction by our Board of Directors.
I sincerely hope you will agree that your shareholders'
interests will be best served by meeting with us to discuss our
proposal.
With best regards,
Bart Becht
SOURCE Avon Products, Inc.