Avon Products is soon to set off selling its business segment to a private-equity firm just as an activist investor is building up a campaign to twist struggling 130 year old beauty product seller.
According to people familiar with the news, Avon has been reported in advanced discourses for selling off its North American business to Cerberus Capital Management LP. As the deal underlies, a minority investment is likely to be made by Cerberus that could prove helpful in building up company’s balance sheet stronger. With an effort like this, Cerberus might turn out to become largest shareholder and be availing board seats too.
Cerberus is perhaps best known for its investments in troubled companies, as well as its willingness to dive into waters few others will. The company’s most famous holding is perhaps Remington Outdoor, the gun manufacturer that made the weapons used in the Sandy Hook and the San Bernardino shootings.
The transaction however, might not be in a position to get materialized and talks are on initial stage. This month will provide an insight of whether there really be any deal or not.
On the other hand, at the same time Barington Capital Group LP (one of another activist group) has lifted up a stake of approx. 3% in Avon. It also initiated a public campaign turn company all over.
In addition to this, NuOrion Partners AG – another activist group is of an opinion that Avon does not require any cash from a private-equity and that it is capable enough for internal operations fixation. The deal is likely to get opposed by activists in current prices. However, deal might be good for shareholders if fair prices are implemented upon it along with little management changed.
Avon recently issued a credit agreement with more onerous lending terms, making an outright buyout of the entire company more difficult because potential acquirers would have a harder time borrowing at the necessary rates, according to a note by Stifel from September.
Apart from this, new chief executive officer might take over succession on Sherilyn McCoy in stabilizing Avon’s business.