Agenda-setting intelligence, analysis and advice for the global fashion community.
NEW YORK, United States — Avon Products Inc. investor Barington Capital Group urged the company to reject a reported deal to sell its North American business at a "fire sale" price, recommending that the cosmetics giant pursue a restructuring plan instead.
The shareholder, which is leading a group that includes NuOrion Partners AG and other investors, said Avon is significantly undervalued and in need of new leaders, according to a statement on Thursday. Barington intends to nominate a slate of director candidates for the 2016 annual meeting, giving it sway over the board.
“Avon’s 6 million sales representatives, the backbone of Avon, deserve a senior management team that can reinvigorate the company and introduce new products and marketing campaigns that will resonate with customers," Barington said in the statement, which was sent to the board of Avon.
In addition to pushing for management changes, Barington wants the company to cut expenses, a move that it says would bring as much as $700 million in annual savings. Avon also should invest in operational improvements and increase its dividend, according to the investment firm, which said its group collectively owns more than 3 percent of the beauty company.
ADVERTISEMENT
Avon shares rose 7 percent to $3.99 on Thursday after the Wall Street Journal reported that the cosmetics company was in advanced talks to sell its North American business and an equity stake to Cerberus Capital Management.
Hammering Out Deal
Avon and the private equity firm are aiming to agree to a deal this month, the newspaper said, citing people it didn’t name. Lindsay Fox, a spokeswoman for Avon, didn’t immediately return messages left by Bloomberg.
The report renewed optimism that investors may be able to wring some value from Avon shares, which have been pummeled by three years of losses and the waning effectiveness of its door- to-door sales model. Avon also has struggled recently with currency fluctuations and a new industrial production tax in Brazil, resulting in an unexpected loss last quarter.
In its response, Barington said that selling a stake at the current stock price doesn’t make sense.
“We would oppose any sale of the North America business on terms that are disadvantageous to current shareholders or limit the options for a new senior management team to maximize long- term shareholder value,” the firm said. “We would also oppose a sale of a dilutive equity stake at a ‘fire sale’ price.”
By Nick Turner, with assistance from Lindsey Rupp.
