Coty Inc., the maker of perfumes by Heidi Klum and Beyonce Knowles, said it is confident in financing for its $10 billion bid to acquire Avon Products Inc. (AVP) as it works to convince investors to support the offer.
BDT Capital partners and Coty’s owner Joh A. Benckiser SE have committed equity financing totaling more than $5 billion, the New York-based company said today in a statement. Coty said it has also received a letter from JPMorgan Chase & Co. for debt financing. Avon in an e-mailed statement today said the offer is “opportunistic” and doesn’t reflect the value of the company.
Coty is working to build support for its attempt to buy Avon, which would more than triple its sales and help expand into emerging markets such as Brazil. The company proposed no more than two weeks to hold private negotiations for the deal, which was valued at $23.25 a share and rejected by Avon April 2.
“The time for Avon shareholders to talk to the Avon board is now,” Coty Chairman Bart Becht said today in a telephone interview. “We are not going to stay around forever. If we get no response from anybody, at some point in time, we will abandon the project.”
Avon fell 2.1 percent to $23.03 at the close in New York. The shares have gained 32 percent this year.
Coty said there are “significant items materially impacting the value of Avon” and it doesn’t know the best price to offer shareholders because it hasn’t been invited to perform due diligence.
The company said it doesn’t know the extent of Avon’s legal issues concerning an investigation related to the Foreign Corrupt Practices Act. In 2008, Avon began a probe into its Chinese operations centering on the bribery of foreign officials that led to the firing of executives.
“The key question which is outstanding, clearly, is price,” Becht said. “We cannot move on price until we do due diligence, because there are material issues which impact the value of the business.”
The takeover would be the biggest in the cosmetics and toiletries industry since Procter & Gamble Co.’s (PG) 2005 purchase of Gillette Co. for $57.3 billion including debt, according to data compiled by Bloomberg.
Avon, which is working to reverse three years of profit declines, named Johnson & Johnson’s Sherilyn McCoy as chief executive officer last week, replacing Andrea Jung.
The announcement of the new CEO hasn’t given Coty pause, Becht said. With its resources and “proven” management team working alongside Avon executives, “we believe that our solution is superior to what they are pursuing today,” he said.
Coty, which holds perfume licenses for brands including Calvin Klein and Marc Jacobs, was founded in 1904 in Paris by Corsican-born Francois Coty. The company helped develop perfume into a mass product, with 36 million consumers two decades later. Coty’s previous purchases include $400 million for a majority stake in Chinese skin-care company TJoy Holdings Ltd. in December 2010.
Coty is focused on the acquisition of Avon at this time, Becht said. The company isn’t currently working on an initial public offering in case the deal doesn’t happen, he said.
“If this project were to be abandoned, we would reconsider it at some point in time,” Becht said.
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