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Avon Secures Shareholder Approval for Takeover by Natura

Zacks Equity Research

Shareholders of Avon Products, Inc. AVP have recently greenlighted the proposed acquisition by Natura & Co — a new holding firm for Natura Cosméticos S.A. The news came a few days after Natura announced that the proposed merger has been approved without any restrictions by Brazil's anti-trust regulator CADE.

The all-share deal is likely to close by first-quarter 2020, subject to the satisfaction of customary closing conditions and regulatory approvals. Post the acquisition, shareholders of Natura Cosmeticos S.A. will own approximately 76% of the combined company, while Avon’s common shareholders will hold around 24%.

The acquisition of Avon will enable Natura to emerge as the fourth-largest beauty company. Per media reports, the combined entity will have a wide reach with more than 6 million consultants and representatives as well as 3200 stores across 100 countries along with its extensive digital presence. Notably, the combined group is expected to have annual gross revenues of more than $10 billion.

Natura has been undertaking initiatives to strengthen its position in the booming global cosmetics and skincare market. The buyout of Avon is just another step toward the same. Earlier, the company had acquired The Body Shop and Aesop.

Market pundits pointed that Avon has been struggling for a while due to intense competition from the likes of Natura, L’Oreal SA and Estee Lauder EL. In the last reported quarter, total revenues for Avon declined 17% year over year to $1,188 million. The downside was primarily caused by currency pressure from Brazil and huge drop in average representative sales in Russia.

Nevertheless, Avon has been focused on transforming the business through the ‘Open Up Avon’ strategy, which revolves around the company’s aspirations to turnaround the business and drive shareholders’ value.

Avon Products, Inc. Price and Consensus

 

Courtesy of positivity surrounding such efforts, Avon’s shares have soared 38.7% in the past six months compared with the industry’s growth of 7.6%.

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e.l.f. Beauty, Inc. ELF with a Zacks Rank #2 (Buy), has a long-term earnings growth rate of 3.8%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Helen of Troy Ltd. HELE currently has a long-term earnings growth rate of 7.6% and a Zacks Rank #2 (Buy).

Kimberly-Clark (KMB), a Zacks Rank #2 stock, has a long-term earnings growth rate of 5.5%.

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Click to get this free report e.l.f. Beauty Inc. (ELF) : Free Stock Analysis Report Avon Products, Inc. (AVP) : Free Stock Analysis Report The Estee Lauder Companies Inc. (EL) : Free Stock Analysis Report Helen of Troy Limited (HELE) : Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research