Coty Reaffirms Interest in Avon
Coty Inc., a global beauty company, sent the following letter to Avon Products, Inc., reaffirming its interest to acquire the company for $23.25 per share in cash. The company has also accepted an invitation from AllianceBernstein to discuss its proposal and answer questions from the investment community via webcast. A replay of the webcast is available at http://coty.pressnews.net/.
A copy of the letter sent to Avon follows below:
April 16, 2012
Andrea Jung, Chairman and Chief Executive Officer
Avon Products, Inc.
1345 Avenue of the Americas
New York, NY 10105
Dear Andrea:
Since we first made public our proposal to acquire Avon for $23.25 per share in cash, we have carefully watched the public reaction to the news and your recent announcement of the hiring of a CEO. We continue to believe in the benefits of our proposed acquisition, and remain interested in meeting with you to discuss our proposal, which we will pursue only on a friendly, consensual basis.
We are confident in our ability to finance the acquisition. BDT Capital Partners, LLC has arranged for equity commitments which, together with the equity committed to us by the Joh. A Benckiser companies, total more than $5 billion. Coty has also received a highly confident letter from J.P. Morgan Securities LLC for the debt financing. The equity commitments and debt highly confident letter are subject to conditions, including completion of satisfactory due diligence and execution of definitive financing and merger documentation. We intend to structure our financing to achieve an investment grade credit rating for our debt.
Our current proposal of $23.25 reflects what we know about Avon based on public information as well as our concerns with what we do not know. We do not know the extent of the legal issues such as the Foreign Corrupt Practices Act investigation and related investigations and litigation or the extent of the operational challenges, and we cannot calculate the level of synergies from public SG&A information or the amount we would need to reinvest to fix the operational issues. These are all significant items materially impacting the value of Avon.
At this stage, without being invited to complete due diligence, we have no way of knowing the best price we can ultimately pay to Avon shareholders.
As we have also said before, we are prepared to sign a confidentiality agreement to cover our receipt of confidential information.
We believe strongly that the only reasonable way to reach a conclusion on overall value for your shareholders is to do so in private negotiations, after you have given us access to due diligence. We are proposing that we devote no more than a couple of weeks – at your invitation – in confidential discussions to see if we have a basis for proceeding with a transaction. If we do not, each company can move on, taking its separate course.
I sincerely hope you will agree that your shareholders' interests will be best served by meeting with us to discuss our proposal.
With best regards,
Bart Becht
cc:
Fred Hassan, Board of Directors of Avon Products, Inc.
Byron D. Trott, BDT & Company, LLC
James M. Grant, James C. Woolery, J.P. Morgan Securities LLC
Mary Anne Citrino, Blackstone Advisory Partners L.P.
Paul Schnell, Skadden, Arps, Slate, Meagher & Flom LLP
This letter and Coty's proposal constitute a preliminary, non-binding indication of interest to acquire the outstanding shares of Avon, and the proposal is being submitted based on the understanding that it is not an offer that is capable of being accepted and that there will be no binding agreement between us or any commitment or obligation on either party with respect to the proposal or a possible transaction unless and until a definitive agreement is executed by Avon and Coty. Coty reserves the right to discontinue discussions regarding, and withdraw, the proposal at any time.The proposal is subject to customary conditions, including, among other things, Coty's satisfaction with the results of due diligence in our sole discretion, the negotiation of a mutually satisfactory definitive agreement, financing and the approval of the negotiated terms of a transaction by our Board of Directors.
Avon Products Inc. has yet to publically issue a statement in response to Coty's letter.
A copy of the letter sent to Avon follows below:
April 16, 2012
Andrea Jung, Chairman and Chief Executive Officer
Avon Products, Inc.
1345 Avenue of the Americas
New York, NY 10105
Dear Andrea:
Since we first made public our proposal to acquire Avon for $23.25 per share in cash, we have carefully watched the public reaction to the news and your recent announcement of the hiring of a CEO. We continue to believe in the benefits of our proposed acquisition, and remain interested in meeting with you to discuss our proposal, which we will pursue only on a friendly, consensual basis.
We are confident in our ability to finance the acquisition. BDT Capital Partners, LLC has arranged for equity commitments which, together with the equity committed to us by the Joh. A Benckiser companies, total more than $5 billion. Coty has also received a highly confident letter from J.P. Morgan Securities LLC for the debt financing. The equity commitments and debt highly confident letter are subject to conditions, including completion of satisfactory due diligence and execution of definitive financing and merger documentation. We intend to structure our financing to achieve an investment grade credit rating for our debt.
Our current proposal of $23.25 reflects what we know about Avon based on public information as well as our concerns with what we do not know. We do not know the extent of the legal issues such as the Foreign Corrupt Practices Act investigation and related investigations and litigation or the extent of the operational challenges, and we cannot calculate the level of synergies from public SG&A information or the amount we would need to reinvest to fix the operational issues. These are all significant items materially impacting the value of Avon.
At this stage, without being invited to complete due diligence, we have no way of knowing the best price we can ultimately pay to Avon shareholders.
As we have also said before, we are prepared to sign a confidentiality agreement to cover our receipt of confidential information.
We believe strongly that the only reasonable way to reach a conclusion on overall value for your shareholders is to do so in private negotiations, after you have given us access to due diligence. We are proposing that we devote no more than a couple of weeks – at your invitation – in confidential discussions to see if we have a basis for proceeding with a transaction. If we do not, each company can move on, taking its separate course.
I sincerely hope you will agree that your shareholders' interests will be best served by meeting with us to discuss our proposal.
With best regards,
Bart Becht
cc:
Fred Hassan, Board of Directors of Avon Products, Inc.
Byron D. Trott, BDT & Company, LLC
James M. Grant, James C. Woolery, J.P. Morgan Securities LLC
Mary Anne Citrino, Blackstone Advisory Partners L.P.
Paul Schnell, Skadden, Arps, Slate, Meagher & Flom LLP
This letter and Coty's proposal constitute a preliminary, non-binding indication of interest to acquire the outstanding shares of Avon, and the proposal is being submitted based on the understanding that it is not an offer that is capable of being accepted and that there will be no binding agreement between us or any commitment or obligation on either party with respect to the proposal or a possible transaction unless and until a definitive agreement is executed by Avon and Coty. Coty reserves the right to discontinue discussions regarding, and withdraw, the proposal at any time.The proposal is subject to customary conditions, including, among other things, Coty's satisfaction with the results of due diligence in our sole discretion, the negotiation of a mutually satisfactory definitive agreement, financing and the approval of the negotiated terms of a transaction by our Board of Directors.
Avon Products Inc. has yet to publically issue a statement in response to Coty's letter.