Can Berkshire Make a Buyout Sexy for Avon?

Coty Inc. has increased its bid for Avon Products (NYSE:AVP), with Warren Buffett’s Berkshire Hathaway (NYSE:BRKA) providing financing as the privately-held perfume company seeks to draw Avon into negotiations. However, Coty said that it would withdraw the offer if Avon did not enter into talks by the close of business on May 14.

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The perfume maker has raised its offer to $24.75 per share, or $10.65 billion. Avon’s board announced it would consider Coty’s latest bid “in due course.” Coty offered to purchase Avon for $23.25 per share in April, while its initial bid was $22.25 per share. Avon has rejected all prior offers from Coty, asserting that its company’s value could rise more under a new CEO than as part of Coty. Last month, Avon named former Johnson & Johnson (NYSE:JNJ) executive Sheri McCoy as its new CEO. McCoy said to investors that her first priority as CEO is to stabilize Avon’s business.

According to Coty Chairman Bart Becht, equity financing sources include Coty’s main shareholder, BDT Capital Partners and some of its limited partners, as well as Berkshire Hathaway. JPMorgan Securities (NYSE:JPM) would provide its debt financing

Currently, Avon is dealing with declining sales in the U.S. and a loss of sales representatives. The company is also facing a U.S. probe into overseas bribery allegations. Coty has said that it needs to better understand Avon’s ongoing Foreign Corrupt Practices Act investigation and litigation. The perfume-marker has also revealed that it would need to know what it would cost to address operational and financial problems and those liabilities.

Avon reported weak first-quarter results last week, which include a sharp drop in profits. The world’s largest seller of cosmetics said it would conduct a thorough business review this year. Avon shares rose 20 cents to $21.80 in premarket trading.

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