Avon Products has sold a controlling stake in its North American business to hedge fund Cerberus Capital Management.
As well as buying 80.1 per cent of Avon US, Cerberus will take a 16.6 per cent stake in the Avon parent company.
Worth a combined US$605 million, the cash injection has been described as “a lifeline” to the iconic cosmetics brand which is struggling to remain relevant in an age where direct selling has been eclipsed by eCommerce. Avon was founded in 1886.
The $435 million Cerberus is paying for the parent stake puts a value of $2.6 billion on Avon – a fraction of the $10.7 billion Coty Inc offered just three years ago, only to be rejected by Avon’s board.
Disgruntled investors, led by Barington Capital, have been fighting for a restructuring of the company and oppose the Cerberus investment.
As part of the deal, six directors of Avon will step down by CEO Sheri McCoy retains her post.
“While we are pleased that six existing board members have agreed to step down, we are astonished that Sheri McCoy remains as CEO,” Barington CEO James Mitarotonda said in an email. “We intend to explore all available options.”
He said Avon’s board had accepted “fire sale prices,” for the stakes.
Since McCoy took over as CEO in 2012, Avon’s share price has plummeted 80 per cent – and the company’s sales have slumped by a similar rate.
