Natura targets Avon acquisition
March 25, 2019 |
Possible deal makes sense for both companies in a tough global market, analyst says
Brazil's Natura has confirmed that it is holding talks to buy the US cosmetics company Avon, and analysts said a possible acquisition makes sense for both companies in a tough global market.
"I think it's possible that Natura will buy Avon just like it did with The Body Shop two years ago," said Georgia Jorge, an equity analyst from Banco do Brasil. "Natura has a good track record when it comes to M&A and it would be able to use Avon's stores in the US to sell its products."
Natura bought The Body Shop from L'Oréal for €1bn ($1.13bn) in June 2017. It has now set its sights on Avon's US business, owned by the private equity firm Cerberus, and the publicly traded Avon Products, based in London.
Avon's minority shareholders, including Barington Capital, Shah Capital and NuOrion Partners, have urged the company to put itself up for sale after disappointing sales. Avon also faces a class action lawsuit that alleges it misled investors about its performance in Brazil to get better credit terms.
"Avon has not been doing well for a while, especially in Brazil, where it has been losing market share," Jorge said. "But I don't think this will happen too fast. It may take a few months to negotiate a deal."
Shares in Natura dropped 7.78% to BRL41.50 ($10.53) on Friday, while shares in Avon rose 10.1% to $3.06.