Avon Products Inc and Cerberus Capital Management have signed definitive agreements to drive enhanced focus on Avon’s international markets, revitalize Avon’s North American business and deliver long term value to Avon shareholders. The partnership which has the approval of of the Avon board of directors includes a US $605 million equity investment by affiliates of Cerberus. The transaction is expected to complete in Spring 2016. There are two components:
Cerberus will make a US $435 investment in Avon Products. The investment will be in the form of convertible perpetual preferred stock with a conversion price of US $5.00 per share and a dividend that accrues, or is payable at Avon’s option under certain circumstances in common shares or cash, at a rate of 5 per cent per annum. This equates to an ownership interest of approximately 16.6 per cent as at 16 December 2015.
Avon North America will be separated from Avon products into a privately held company, majority-owned and managed by Cerberus. Cerberus will purchase an 80.1 per cent interest in Avon North America for a US $170 million equity investment. Avon North America will also assume approximately US $230 million of long term liabilties from Avon Products, which will partially offset by a US $100 million cash contribution from Avon.
The partnership aims to position the international business for accelerated growth in beauty and direct selling and create greater earnings opportunities for Avon representatives as well as improve cost structure and operational efficiencies to deliver long term value to shareholders.
Avon generated nearly $9 billion in annual revenue in 2014 and has 6 million active independent Avon sales representatives.
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