$2.85-Billion Bid : Avon Snubs Jacobs’ Takeover Proposal
Avon Products Inc.’s directors on Thursday spurned investor Irwin L. Jacobs’ $2.85-billion takeover proposal and reiterated their belief that the cosmetics giant should remain independent.
The move, the latest in a string of rejections the direct sales company has doled out to unwanted suitors, had been expected.
But speaking from his headquarters in Minneapolis, Jacobs said he would take Avon Chairman and Chief Executive James E. Preston up on an offer to meet and discuss Avon’s “business plans.”
Preston said in a letter to Jacobs that he would be willing to meet with the investor--as he would with any major shareholder--but “not to negotiate a sale of the company.” An Avon spokesman also noted that Jacobs would not be allowed to meet with the entire board.
“We are going to take the high road in this thing,” Jacobs said in a telephone interview. “I will very happily meet with him, which is more than others have gotten to do.”
Jacobs said he thought a meeting could be held within the week.
The Solo Approach
Preston officially responded to Jacobs’ offer by letter but phoned the investor before the letter was released. Jacobs described the call as “very friendly and amicable and one that I was pleased to get, and yet I wished the results were a little better.”
On Wall Street, Avon stock slid 62.5 cents a share to $35.875 in consolidated New York Stock Exchange trading, indicating dealers were skeptical of Jacobs’ $41-a-share offer.
On Wednesday, Jacobs tried the solo approach with Avon directors, who three months ago rejected a bid engineered by Jacobs’ partner and Avon’s rival direct sales company, Amway Corp.
In his brief letter to Jacobs, Preston said the board “thoroughly” reviewed the proposal with its investment banker, Morgan Stanley & Co., at a regularly scheduled board meeting.
“The board unanimously rejected your proposal,” Preston said. “The board believes that the best interests of the shareholders would be served by Avon remaining an independent company and being allowed to execute its business plan.”
Jacobs’ plan calls for selling Avon’s retail unit, which includes the Giorgio Beverly Hills and Parfums Stern fragrance lines.
Through a partnership with Jacobs, Amway controls about 10.3% of Avon’s common stock; Jacobs controls about 55% of the Avon stock owned by the alliance, known as A-J Partnership.
In May, the Avon board rejected Amway’s hostile $39-a-share takeover bid and indicated that it would resist future acquisition attempts. Days later, Avon also rebuffed overtures from Mary Kay Corp., parent of the door-to-door cosmetics seller Mary Kay Cosmetics Inc.
In addition to paying $2.25 billion for Avon’s 54.91 million common outstanding shares, Jacobs also said he might redeem Avon’s preferred shares at $33.50 each, or a total of about $603 million, raising the price tag on Avon to roughly $2.85 billion.
