NEW YORK, Mon Apr 2, 2012 – Beauty company Coty Inc. said on Monday it offered to buy Avon Products Inc. for $10 billion, but the bid was rejected by the cosmetics direct seller, which is grappling with sliding sales in key markets and a bribery probe.
Coty, whose products include fragrances for celebrities including Beyonce and Lady Gaga, said it had no plans to make a hostile bid but had been “unsuccessful” in getting Avon to talk about a deal.
Coty, a fast growing privately held company majority-owned by John A. Benckiser, is offering $23.25 per share, a 20 percent premium over Avon’s Friday closing price of $19.36 on the New York Stock Exchange.
Shares of Avon rose 19.3 percent to $23.10 in premarket trading.
Avon, in a statement on Monday, rejected the offer, saying it “substantially undervalues” the company.
Avon is searching for a new CEO to replace Andrea Jung, who has held the reins since 1999. Avon has said the new CEO will undertake a top-to-bottom review of the struggling company, which is also dealing with a probe into whether it broke U.S. anti-bribery laws in China.
Avon said that having a new CEO will create a “greater opportunity” to increase the company’s value beyond what Coty is offering.
The company is facing a long decline in sales and the number of sales representatives in the United States. During the holiday period, sales in key emerging markets like Brazil and Russia fell.
Coty said it originally offered $22.25 per share in early March but failed to entice Avon into talks. It said it went public with its latest offer after sending three letters to Jung but failing to draw Avon into discussions.
“We do not understand how your Board’s unwillingness to discuss our proposal can serve the best interests of Avon’s shareholders,” Coty Chairman Bart Becht said in letter to be delivered to Jung on Monday.