Cosmetics gets hostile - the Coty bid for Avon

Coty’s £6bn bid for its close competitor Avon (which may soon go hostile if Avon doesn’t play ball) looks like it might turn into a ding-dong battle between the two firms. This would be ironic given that Avon is best-known for its ding-dong door bell commercials from the 1970s and 1980’s. There is lots in the press about the bid - this article from Reuters provides some useful background.. For an alternative take on the deal, you can;t beat the Guardian’s Kipper Wiiliams who sums it up nicely here.

The Coty bid looks a little opportunistic to me. Avon has been without a CEO for several months and their share price has drifted lower over a prolonged period. This might suggest that Coty sees both a strategic rationale to the takeover as well as a financial motive (buying a major competitor whilst its share price is unusually low). As always, the decision will be made by the shareholders who might want to see whether Avon can bring in a CEO capable of restoring their shareholder value.

Alternatively, the Avon Board may decide to recommend a higher offer from Coty. Interestingly, Coty has offered to review its offer (i.e. contemplate a higher price) if Avon allows Coty to begin a formal due diligence process. This looks a bit like a direct sales trick that Avon might appreciate - once you have a foot in the door, it’s much easier to close the sale!