Avon Products and Cerberus Capital Management have announced the close of their strategic partnership transaction, which will see Avon’s North American unit transferred into a privately owned company, owned in the majority by Cerberus. The North American business will operate under the name New Avon LLC.
Under the terms of the deal, an affiliate of Cerberus invested US$435 million in Avon Products in exchange for convertible perpetual preferred stock, equating to an ownership interest of 16.6 percent as of March 1, 2016. The affiliate has also invested US$170 million for an 80 percent ownership interest in Avon’s North American business (New Avon), with Avon Products retaining a 20 percent interest.
“Our strategic partnership with Cerberus sets Avon on a solid path to profitability and growth by providing a solution for the North America business as well as capital, focus, and resources to support Avon Products, Inc. in the execution of our transformation plan,” said Sheri McCoy, Chief Executive Officer of Avon. “The partnership, along with other actions we are taking, also further increases our financial flexibility. We have significant capital resources and liquidity with which to fund working capital, restructuring costs, and opportunistic debt retirement.”
Steven F. Mayer, Senior Managing Director and Co-Head of Global Private Equity of Cerberus added, “We are strong believers in the power of the Avon brand and the direct-selling business model, and are confident we can be a catalyst for improvement in both North American and the international markets. Having now spent months with the company, its management team, its Representatives and its Associates, we are even more enthusiastic about investing in the North American Representatives and business. Our goal is to make the direct-selling model and the Representative experience more contemporary, efficient, and profitable by reinvigorating the Avon brand, improving New Avon LLC’s competitiveness, and positioning it for long-term, sustainable growth.”