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Buffett Backs Coty's Sweetened Bid For Avon Products (AVP)

 May 10, 2012 10:59 AM
 


(By Balaseshan) Avon Products Inc. (NYSE:AVP) has received sweetened buyout offer from privately-held fragrance maker Coty Inc., backed by billionaire investor Warren Buffett's Berkshire Hathaway (NYSE: BRK.B).

Coty boosted its offer for the cosmetics company to $24.75 from $23.25 per share. The revised offer price represents a premium of more than 36% to Avon's closing price on March 6 - the day before Coty's initial offer of $22.25 per share.

In a letter sent to Avon's board of directors, Coty urged Avon to move forward with talks and it would withdraw the offer if Avon didn't respond by Monday. Avon, which generates $11 billion in annual revenue, said its board will consider the letter "in due course."

[Related -Berkshire & Buffett: Long-Term Vision]

Coty's equity financing sources include Berkshire Hathaway Inc. along with the German holding company that controls Coty, Joh. A. Benckiser GmbH, and BOT Capital Partners. JPMorgan Securities would provide debt financing.

Avon had rejected Coty's $10 billion offer in early April, saying it substantially undervalues the company and was "opportunistically timed" while it was searching for a new CEO. After a week, Avon appointed Johnson & Johnson executive Sherilyn McCoy as its new CEO to spearhead its turnaround plan.

Coty now urged Avon to conduct the review in parallel with considering its offer so that Avon's board could compare both proposals side by side and make the right choice for Avon shareholders.

[Related -Coty Inc. (COTY) Shares Drop In IPO Debut]

Meanwhile, Coty 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 for a merger deal.

AVP is trading down 0.93% at $21.40 on Thursday. The stock has been trading between $16.09 and $30.62 for the past 52 weeks.

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