Natura acquires Avon in all-stock deal

Natura acquires Avon in all-stock deal

M&A Equity Brazil US

Brazil's Natura said it has agreed to buy Avon Products in an all-share deal worth around $2.8bn.

The acquisition creates the fourth largest cosmetics group in the world with estimated revenues of more than $10bn per year, Natura said in a statement.

Natura also said it expects the tie-up to result in synergies of $150m to $200m per year, some of which will be reinvested in digital sales, geographic expansion and research and development.

As part of the transaction, the company has created a new holding company in Brazil, Natura Holding. Natura will own roughly 76% of the combined company, based on an exchange rate of 0.3 Natura Holding shares for each share in Avon.

The transaction values Avon at $3.7bn, a 28% premium on Avon's share price on March 21, the day before Natura confirmed that it had entered talks to buy the US cosmetics company. The combined company is valued at roughly $11bn, Natura said.

Avon's shareholders have the option to receive Natura shares on the B3 stock exchange in São Paulo or American depositary receipts on the New York Stock Exchange (NYSE). Natura's shares rose 9.43% to BRL61.50 ($15.22) on Wednesday, while Avon's shares jumped 16.1% after hours to $4.05.

UBS and Morgan Stanley advised Natura on the acquisition, while Goldman Sachs and PJT Partners advised Avon. Natura said it expects to close the deal in early 2020.

Natura previously acquired The Body Shop from L'Oréal for €1bn ($1.12bn) in June 2017 and Aesop for AUD68m ($46.8m) in December 2012. Avon's owner, Cerberus Capital Management, sold its North American business to South Korea's LG for $125m in April this year.

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