Avon Holders, Managers Spar Over Strategy
Shareholders of Avon Products Inc., which has been under pressure to cut costs, sell assets or put itself up for sale, urged the cosmetics giant Thursday to either drop a key takeover defense or let shareholders vote on keeping it.
Shareholders approved two nonbinding proposals at their annual meeting relating to the company’s share rights plans, commonly known as poison pills, that can make unsolicited buyout bids prohibitively expensive.
One proposal urged the company, which had nearly $3.3 billion in sales last year, to either drop the rights plan or submit it to a shareholder vote. The second urged a vote on the plan.
Both proposals were opposed by Avon management, which insists that the company is not for sale and wants to proceed with plans to making its direct-selling business more profitable.
But each passed with nearly 25.4 million shares in favor, more than 16.7 million opposed and more than 16.7 million abstaining.
In trading on the New York Stock Exchange, Avon closed down 75 cents a share at $36.375.
The United Shareholders Assn., a Washington-based advocacy group, said one of the approved proposals was introduced by one of its members, Norman Warner, as part of its “Target 50” program aimed at what it calls “the most anti-shareholder companies in America.”
“Avon’s management would be foolish not to implement proposals that so clearly expressed the will of the shareholders,” said association director Ralph Whitworth.
The shareholders also elected four directors to the Avon board, including two nominees representing the investor group Chartwell Associates LP. Chartwell owns 12% of Avon’s voting stock and had threatened to run a slate of four candidates for seats on the 11-member board.
But under a settlement reached in late March, Avon agreed to support two Chartwell nominees along with two incumbent directors for the four seats that were up for election. Those nominees were elected Thursday.
In addition, Avon agreed to set up a committee to consider ways of boosting value for Avon stockholders, including a recapitalization, asset sales or selling the whole company.
The committee will include four Avon directors and executives and the two new board members from Chartwell, M. Anthony Fisher and Marc Leland.
The settlement also called for the appointment of John P. Rochon, a principal in the Chartwell group, as an Avon adviser once he resigns as vice chairman of Mary Kay Cosmetics, Avon’s Dallas-based rival.
