Avon Discusses Stake Sale With Private-Equity Firms
Cerberus, Platinum Equity, others discuss deal with Avon
Avon Products Inc. is in discussions with private-equity firms about an investment that could help shore up the struggling cosmetics company, according to people familiar with the matter.
Avon is running an auction process for what is known as a private investment in public equity, or PIPE, with firms including Cerberus Capital Management and Platinum Equity. Bids are due next week, the people said, with some adding that a PIPE is just one of the options the company is considering.
It’s unclear how big a stake would be sold and there’s no guarantee such a deal will materialize.
New York-based Avon, which has been around for more than a century, has struggled for years to reverse sales declines. Its business of selling cosmetics and home goods door-to-door via a network of around 6 million active representatives has had difficulty keeping up with changing shopper habits, and Avon has been slow to increase sales via the Internet. It has been cutting costs heavily and recently reported a small profit for its U.S. business, which has been particularly troubled.
Shares of the company, with $8.9 billion in sales last year, had fallen by more than half this year and lost roughly 90% of their value from a 2004 high. The company currently has a market value of just under $2 billion.
Securing an investment from a prominent new shareholder could help stabilize Avon’s stock and bolster its liquidity. The company’s debt is rated speculative-grade by major ratings firms, and while its finances are not precarious, its cash has been declining. At the end of June, Avon reported $697 million in cash and equivalents, down from $961 million at the end of 2014.
The company in June obtained a new $400 million, five-year credit line from banks, but its weaker finances resulted in stiffer lending terms. The new credit line, if drawn upon, would be secured by Avon’s U.S. assets and its stock in some subsidiaries.
The company has tried for years to repair weak financial results and stem an exodus of sales representatives. In April, people familiar with the matter said Avon was exploring options including a sale of the company or its North American business.