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Avon will consider Coty offer

by Lou Whiteman  |  Published May 14, 2012 at 11:52 AM
Avon Products Inc. said Sunday, May 13, that its board would consider an unsolicited $10.7 billion offer from Coty Inc., softening its stance against a deal ahead of a Coty deadline to respond to its offer.

New York-based Avon, which has rejected previous Coty overtures, said it expects to respond to Coty within a week. Coty put Avon in play last month with a $10 billion, or $23.25 per share, offer that was increased to $24.75 per share last week.

Privately held Coty, also of New York, has pledged not to go hostile against Avon, instead hoping Avon's shareholders will pressure it to come to the table for talks. Coty warned that should Avon not engage in discussions by end-of-business Monday, it would "inform the public markets of the circumstances of our withdrawal."

Coty had no comment on Monday morning on whether it intended to stay firm with its deadline, or extend it to accommodate Avon's request for a week to consider the offer.

A fragrance maker controlled by German family holding company Joh. A. Benckiser GmbH, Coty has said it would fund the proposed deal with equity financing from Warren Buffett's Berkshire Hathaway Inc. and existing shareholders and debt provided by J.P. Morgan Chase & Co. Buffett has traditionally been reluctant to pursue hostile takeovers.

By midmorning, shares of Avon were up 96 cents, or 4.8%, to $21.15. The stock traded in the high teens before Coty went public with its original offer, weighed down by quarterly losses and an ongoing investigation into foreign bribery charges.

On May 1, Avon reported first-quarter earnings of $26.5 million, or 6 cents a share, on sales of $2.58 billion, compared with a $143.6 million profit on revenue of $2.63 billion a year prior.

Excluding certain items, the company earned 10 cents per share for the quarter, well below the 28 cents per share analyst estimated.

Coty is receiving financial advice from BDT & Co. LLC, J.P. Morgan and Blackstone Advisory Partners LP, and legal advice from a Skadden, Arps, Slate, Meagher & Flom LLP team led by Paul Schnell and Neil Stronski.
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Tags: Avon Products Inc. | BDT & Co. LLC | Berkshire Hathaway Inc. | Blackstone Advisory Partners LP | Coty Inc. | J.P. Morgan Chase & Co. | Joh. A. Benckiser GmbH | Neil Stronski | Paul Schnell | Skadden Arps Slate Meagher & Flom LLP | Warren Buffett

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