Avon Shares Drop After Analyst Downplays Its Takeover Prospects

Avon Products Inc. shares tumbled as much as 6.8 percent after Canaccord Genuity said the company’s prospects as a takeover target are probably overblown.

The cosmetics seller may not make sense as an acquisition for rivals in the makeup industry or private-equity buyers, Canaccord analyst Eddy Hargreaves said in a report. He doesn’t have a rating on the company, which lost more than half its value this year. The stock fell as low as $3.86 on Monday in New York.

Avon has been the subject of takeover speculation since it rejected advances from Coty Inc. in 2012. Since then, the company has posted three years of declining sales, partly because consumers are shifting away from door-to-door cosmetics purchases -- Avon’s hallmark.

“There has been no concrete offer for the business (or a stake in it) since 2012, despite the collapse in the share price,” Hargreaves said in the report. “This may be attributed to general skepticism about the long-term viability of the direct selling model, which has lost traction in developed markets.”

In May, Avon was the target of a takeover hoax that sent its shares up 20 percent. The rally was sparked by a fake regulatory filing that described an offer for the company at three times its share price. Regulators later said that a Bulgarian man was responsible for the scheme.