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Coty would like to create a cosmetics giant with Avon

US cosmetics maker and celebrity fragrances specialist Coty has proposed to buy Avon, the world’s largest cosmetics direct seller, for approximately 10 billion US dollars.

Bart Becht, Chairman, Coty Inc.

Bart Becht, Chairman, Coty Inc.

Coty has decided to make its proposal public, after extensive but unsuccessful attempts to engage Avon in discussions. However, the company 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,” said Mr. Bart Becht, Chairman of the Board of Directors of Coty in a release.

In a statement today, Avon officially rejected the offer, saying it “substantially undervalues” the company and is “opportunistically timed”.

Indeed, Coty’s offer is putting more pressure on Avon’s management board, while the company is now in the fourth month of its search for a new CEO, and is facing a drop in sales in its main markets, the United States, Brazil and Russia.

For Coty, which is smaller in size, a merger with Avon will be an occasion to diversify its product portfolio and geographical expansion. In particular, Coty would become less dependent on fragrances. “Coty is an innovation leader in Fragrances and Nail Products, while Avon has more core strength in Color and Skin and Body Products,” wrote Bart Becht in its latest letter to Andrea Jung, Avon’s Chaiman and CEO. “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,” he added.


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