Irwin Jacobs Makes $2.85-Billion Bid for Avon
Minneapolis investor Irwin L. Jacobs is proposing a $2.85-billion takeover of Avon Products, a 103-year-old cosmetics giant that has rejected two other recent buyout offers.
Avon said Wednesday that it had received a letter from Jacobs late Tuesday requesting a meeting to negotiate an all-cash deal. James E. Preston, Avon’s chairman, said the company’s board would discuss Jacobs’ letter at a regularly scheduled board meeting today.
Jacobs said he has hired Citicorp, the New York banking organization, to arrange financing to acquire Avon, long known for its “Avon lady” direct sales force. Under the plan, Jacobs would sell Avon’s retail unit, which includes the fragrance lines of Giorgio Beverly Hills and Parfums Stern.
The Giorgio division’s main fragrance, also known as Giorgio Beverly Hills, had sales exceeding $100 million in 1988. It was the nation’s top-selling fragrance offered exclusively in department stores. Santa Monica-based Giorgio in February launched a second fragrance, Red from Giorgio Beverly Hills. The Parfums Stern line includes Uninhibited by Cher and the Oscar de la Renta, Perry Ellis and Valentino fragrances.
Jacobs, in a telephone interview, said he would sell the retail division to offset the cost of the proposed acquisition and reduce Avon’s $1 billion of existing debt.
“They’re good companies but they just don’t fit into our plans,” Jacobs added.
Jacobs said he wants to acquire Avon to boost the sales of Winona, Minn.-based Watkins Inc., a company he bought in 1978 involved in the direct sale of spices, cosmetics and skin cleansers. Avon’s sales operation--particularly its international sales force--could help sell Watkins products, Jacobs said.
Name Came Up Before
Under the proposal, Jacobs would pay $41 per share for 54.9 million shares of common stock and has offered to redeem each of Avon’s 18 million preferred shares for $33.50. Avon’s common stock rose 87.5 cents to close at $36.375 a share Wednesday on the New York Stock Exchange.
“Why not sit down with me to explore the feasibility of this transaction?” Jacobs’ letter said. “Why not demonstrate to me why I should pay more if you find $41 to be inadequate?”
Jacobs’ name came up previously in connection with a proposed Avon takeover. Amway, which has a partnership with Jacobs that owns 10% of Avon’s stock, made a $2.1-billion bid for Avon in May. The offer was withdrawn after Avon rejected it with a blistering statement that branded Amway, also a direct sales firm, an “admitted criminal.”
Jacobs, who owns about 5.5% of Avon’s stock by himself, was not involved in the Amway offer and said Amway was not involved in his new proposal. He added that he would not sell any portion of Avon to Amway or to Dallas-based Mary Kay Cosmetics Inc., a direct seller that has also recently expressed interest in Avon.
Avon, in a written response to Jacobs, noted that it has consistently rejected buyout offers. Many industry analysts said they expect Avon to reject Jacobs’ offer.
