Fragrance maker Coty Inc. said late Monday that it has withdrawn its $10.7 billion takeover bid for larger rival Avon Products Inc. (AVP: Quote), as the deadline set by the company to begin talks expired today. Coty said it was time for it to "move on and pursue other opportunities".
In a letter sent to Avon's board of directors, Coty said, "We received encouragement from many of your shareholders, research analysts and others in the financial community. Despite this support, your total lack of engagement with us leads us to believe that you remain reluctant to explore a friendly, negotiated combination on a reasonable timetable. Two months is enough."
Avon said on Sunday it will consider Coty's sweetened takeover offer of $24.75 per share and will respond within a week.
Privately-held Coty last week sweetened its offer for Avon to $24.75 per share and urged the company to move forward with talks. In a letter sent to Avon's board of directors, Coty said it would withdraw its offer if Avon did not enter into talks with it by May 14.
Coty has cited Avon's "disappointing" first-quarter results and outlook, as well as its recent credit ratings downgrades as reasons for Avon to enter into talks with it for a merger deal.
Coty, which named Warren Buffett's Berkshire Hathaway Inc. (BRKa, BRK-A, BRK-B) as one of the equity financing sources for its bid, had noted that its offer would provide compelling value to Avon's shareholders "relative to a difficult and uncertain multi-year turnaround on a stand-alone basis."
Coty had earlier offered to acquire Avon for $23.25 per share, in an all-cash deal valued at about $10 billion. However, Avon immediately rejected the unsolicited bid and said it remains confident in its prospects as a stand-alone company.
A week after it rejected Coty's offer, Avon appointed Johnson & Johnson executive Sherilyn McCoy as its new CEO to spearhead its turnaround plan.
In its letter sent to Avon on Monday, Coty said it had been its sincere hope to explore a friendly combination of the two companies and had accordingly reached out to Avon at the beginning of March with a takeover offer.
However, Coty noted that continued delay and unwillingness on the part of Avon to engage in talks was disappointing and "certainly not a constructive way to proceed".
"We believe that we provided a compelling and well-financed proposal for a business facing multiple challenges. As you know, our proposal included equity commitments in excess of $5.8 billion from Joh. A. Benckiser, BDT Capital Partners and certain of its limited partners, and Berkshire Hathaway Inc.," Coty said.
However, Coty noted that since making its sweetened offer, no one from Avon's board or management had been willing to speak with the company.
"While we are disappointed, we wish you success in pursuing your standalone turnaround strategy," Coty said.
AVP closed Monday's trading at $20.96, up $0.77 or 3.81 percent on a volume of 10.61 million shares.
by RTT Staff Writer
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