Avon Confirms Advanced Takeover Talks With Natura
Avon Products Inc. confirmed Wednesday that it is in advanced deal talks with Natura & Co.
The business put out a statement saying it confirmed the company "is in advanced discussions with Natura & Co. regarding a potential all-stock transaction." The company also said there was no guarantee a deal would take place, and that it would not comment further.
The statement partially confirms a report from The Financial Times that Natura was in talks to buy 76 percent of the company at a valuation of more than $2 billion.
If the deal goes through, it would give Natura another project of a business. The Brazilian direct seller has been working to turn around The Body Shop since it bought it from L'Oréal in 2017, and Avon would also require work. Natura also owns Aesop.
The Avon business has struggled in recent years, and posted $3.75 billion in net sales for calendar 2018, down about 10 percent from the prior year.
The company spun off its North America operations in 2016, selling a majority position to private equity firm Cerberus Capital Management and intending to focus on its larger international markets. The North America division was especially troubled, and continued to struggle under new ownership. LG Household & Health Care said it would buy the business for $125 million back in April.
The international business, dependent on markets like Brazil, Russia and the Philippines, has worked to modernize through initiatives like digital brochures and electronic training programs under Jan Zijderveld, who took the helm as chief executive officer in early 2018. But the company's numbers for active representatives continue to dip.
Skeptics of the business say the traditional direct-selling model simply does not work anymore.
Other companies, like Rodan + Fields and Beautycounter, have modified the model in terms of inventory requirements and are calling it "social selling." Now sales come from leveraging the social networks of sales representatives who post about products on social media platforms like Facebook and Instagram.
If the deal closes, it would give Natura the leading position in beauty and personal care in Brazil, according to calculations from Jefferies analyst Stephanie Wissink, who said the combined business would eclipse Unilever by 5.5 points.
"The combination may be a response to share pressure for both companies. According to , Natura and Avon have both lost share in Brazil over the last 10 years, from a combined 24 percent in 2009," Wissink said. Those market share points have gone to Unilever and Botica, she noted, during a time frame when the Brazilian beauty market has doubled in size.
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