Avon Products Inc. rose as much as 11 percent in early U.S. trading after a report that L’Oreal SA may make a takeover offer for the world’s largest door-to-door cosmetics seller.
L’Oreal is considering a bid of $44 a share, the U.K.’s Daily Mail newspaper said, without saying where it got the information. That’s 33 percent more than New York-based Avon’s close yesterday. A bid at that price would be worth about $19 billion, based on Avon’s shares outstanding as of June.
Avon is attracting interest from several companies, including L’Oreal, the Daily Mail said. The cosmetics retailer, whose sales topped $10 billion last year, gets more than 70 percent of its revenue from its beauty business, with representatives going door to door to pitch color cosmetics, skin care and fragrances.
“We would not be surprised if L’Oreal scouted the acquisition trail,” UBS AG analysts Eva Quiroga and William Houston wrote in a note today, citing the company’s low net debt level and its stake in Sanofi-Aventis SA. However, L’Oreal has no experience in direct selling and has struggled with the Body Shop since acquiring the retail chain in 2006, they wrote.
Stephanie Carson-Parker, a spokeswoman for L’Oreal, declined to comment. Jennifer Vargas, an Avon spokeswoman, didn’t immediately return a call placed before regular business hours.
Avon climbed as high as $36.85 in trading before exchanges opened after closing at $33.16 yesterday on the New York Stock Exchange. L’Oreal shares fell 38 cents, or 0.5 percent, to 81.28 euros as of 2:22 p.m. in Paris.
Avon’s Strategy
Avon has said it’s examining whether to move out of businesses such as the home cleaning and appliances units to focus on more profitable businesses. The company, led by Chief Executive Officer Andrea Jung, agreed in July to buy jewelry company Silpada Designs Inc. to expand its product line.
Mergers and acquisitions in the personal-care industry have picked up lately. Unilever agreed to buy Alberto-Culver Co. last month for $3.7 billion to add Nexxus and VO5 hair products, while Reckitt Benckiser Group Plc in July bought SSL International Plc, the maker of Durex condoms.
L’Oreal’s net debt totaled 1.67 billion euros ($2.3 billion) as of June 30, about 300 million euros less than at the end of 2009, the maker of Garnier shampoo and Lancome lipstick said at the time.
L’Oreal has no plans to change its 9 percent stake in Sanofi in the short term, though the investment isn’t strategic or long term, CEO Jean-Paul Agon said in August. UBS values the holding at 5 billion euros currently.
An offer by Paris-based L’Oreal for Avon is “a low probability event,” according to Chas Manso, an analyst at Evolution Securities Ltd. in London. “My own personal view is that L’Oreal isn’t interested in the direct-selling model,” Manso said.
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L’Oreal is considering a bid of $44 a share, the U.K.’s Daily Mail newspaper said, without saying where it got the information. That’s 33 percent more than New York-based Avon’s close yesterday. A bid at that price would be worth about $19 billion, based on Avon’s shares outstanding as of June.
Avon is attracting interest from several companies, including L’Oreal, the Daily Mail said. The cosmetics retailer, whose sales topped $10 billion last year, gets more than 70 percent of its revenue from its beauty business, with representatives going door to door to pitch color cosmetics, skin care and fragrances.
“We would not be surprised if L’Oreal scouted the acquisition trail,” UBS AG analysts Eva Quiroga and William Houston wrote in a note today, citing the company’s low net debt level and its stake in Sanofi-Aventis SA. However, L’Oreal has no experience in direct selling and has struggled with the Body Shop since acquiring the retail chain in 2006, they wrote.
Stephanie Carson-Parker, a spokeswoman for L’Oreal, declined to comment. Jennifer Vargas, an Avon spokeswoman, didn’t immediately return a call placed before regular business hours.
Avon climbed as high as $36.85 in trading before exchanges opened after closing at $33.16 yesterday on the New York Stock Exchange. L’Oreal shares fell 38 cents, or 0.5 percent, to 81.28 euros as of 2:22 p.m. in Paris.
Avon’s Strategy
Avon has said it’s examining whether to move out of businesses such as the home cleaning and appliances units to focus on more profitable businesses. The company, led by Chief Executive Officer Andrea Jung, agreed in July to buy jewelry company Silpada Designs Inc. to expand its product line.
Mergers and acquisitions in the personal-care industry have picked up lately. Unilever agreed to buy Alberto-Culver Co. last month for $3.7 billion to add Nexxus and VO5 hair products, while Reckitt Benckiser Group Plc in July bought SSL International Plc, the maker of Durex condoms.
L’Oreal’s net debt totaled 1.67 billion euros ($2.3 billion) as of June 30, about 300 million euros less than at the end of 2009, the maker of Garnier shampoo and Lancome lipstick said at the time.
L’Oreal has no plans to change its 9 percent stake in Sanofi in the short term, though the investment isn’t strategic or long term, CEO Jean-Paul Agon said in August. UBS values the holding at 5 billion euros currently.
An offer by Paris-based L’Oreal for Avon is “a low probability event,” according to Chas Manso, an analyst at Evolution Securities Ltd. in London. “My own personal view is that L’Oreal isn’t interested in the direct-selling model,” Manso said.
http://jodnet.blogspot.com
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