|Avon Receives Letter from Coty|
Avon, the company for women, is a leading global beauty company, with over
Board of Directors of
Dear Members of the Board:
Since we made public our non-binding proposal to acquire Avon for cash (the "proposal") more than a month ago, we have spent significant time listening to your shareholders and analyzing public information, including your most recent quarterly results. We continue to believe that our proposal would provide compelling value to Avon's shareholders relative to a difficult and uncertain multi-year turnaround on a stand-alone basis. The combination of Avon and
We have been disappointed by the current stalemate. As you know, we contacted Avon last week in an effort to break this deadlock. We indicated that we were prepared to engage in non-public discussions and discuss an increase to our proposal of
We remain keenly focused on understanding Avon's operational and financial challenges, evidenced by your disappointing first quarter results and outlook, as well as your recent credit ratings downgrades. We need to confirm our synergy estimates, the availability of which will be critical to our final valuation and the reinvestment required to implement a turnaround of Avon. In particular, we are very interested in understanding the components of your SG&A expense line item as we evaluate how to increase economic opportunities for your representatives relative to controlling overall corporate spending. We also need to better understand your ongoing Foreign Corrupt Practices Act investigation and litigation, and what it will cost to address operational and financial problems and these liabilities.
We are prepared to sign a confidentiality agreement with standstill provisions that would restrict us from taking further public steps in seeking to acquire Avon so long as you agree in good faith to provide us with requested information on a timely basis. As we have consistently indicated, we and our financing partners will only pursue this proposal on a consensual basis, including having conducted due diligence. Our equity financing sources will include our principal shareholder Joh. A. Benckiser,
Upon signing the confidentiality agreement, we anticipate we would need only several weeks to conduct expedited due diligence of Avon and finalize the terms of a possible transaction. We have attached to this letter a list of priority diligence items that we believe would enable us to form a definitive view of value beyond where we have arrived based on public information.
When we contacted you again last week, you advised us that Avon's Board of Directors was not prepared to engage in any discussions regarding any revised proposal until Avon had completed a strategic and operational internal review with its new CEO. While we understand Avon's interest in conducting such a review given the significant challenges and uncertainties described in your recent analyst call, this review can and should be done in parallel with exploring the strategic alternative of selling the company so the Board may compare both proposals side by side and make the right choice for Avon shareholders.
In any event, we will not keep our proposal open for the several months that you say you need to conduct your internal review. We and our equity sources are prepared to work until
In our final effort to move forward with discussions, we are revising our proposal to
In order to end the uncertainty around this transaction for both your organization and ours, we request that you respond to our revised proposal by close of business on
This letter and our proposal and revised proposal constitute a preliminary, non-binding indication of interest to acquire the outstanding shares of Avon, and our revised 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 revised proposal or a possible transaction unless and until a definitive agreement is executed by Avon and
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,
MEDIA: Victor Beaudet, Avon Products, Inc., +1-212-282-5344, Jennifer Vargas, Avon Products, Inc., +1-212-282-5404; Steven Lippin, Brunswick Group LLC, +1-212-706-7875; INVESTORS: Amy Chasen, or Monica Chang, Avon Products, Inc., +1-212-282-5320