Natura &Co (B3: NATU3) announced late yesterday that it is acquiring Avon Products, Inc. (NYSE: AVP) in an all-share transaction.
The deal, valued by Natura at around $3.7 billion, caps Avon’s strategic pivot to focus on foreign markets, where sales have been stronger in recent years. The company moved its corporate headquarters to London in 2016 and sold its North American business to private equity firm Cerberus Capital Management for $435 million.
Natura & Co., a consolidation of the beauty brands Natura, The Body Shop and Aesop, said the combined company will have a combined $10 billion in revenue. Natura said it expects the Avon merger to generate $150 to $250 million in revenue annually. It’s expected to close in early 2020.
As part of the all-stock transaction, Natural & Co. shareholders will own about 76 percent of the combined company, while Avon shareholders will own nearly 24 percent.
Avon’s share price soared 16 percent after hours Thursday on the New York Stock Exchange to $4.05 per share.
The acquisition creates a best-in-class multi-brand and multi-channel beauty group, with direct connections to consumers on a daily basis. The group will hold leading positions in relationship selling through Avon´s and Natura’s over 6.3 million Consultants and Representatives, a global footprint through 3,200 stores, as well as an expanded digital presence across all companies. The combined Group is expected to have over 40,000 associates and be present in 100 countries.
“We have always looked at Avon with respect and admiration,” said Luiz Seabra, co-founder of Natura. “Natura was founded on its passion for beauty and relationships, and today’s transaction creates a major force in the direct-to-consumer space. Direct selling was a social network before the word even existed, and the arrival of technology and globalization only multiplied opportunities to connect with consumers in a meaningful way. The peer-to-peer sales model is evolving towards social selling and the power of digital allows the group to go beyond providing products and advice, and advances women empowerment, through financial independence and enhanced self-esteem. We believe that business can be a force for good and together with Avon, we will amplify our pioneering efforts to bring social, environmental and economic value to an ever-expanding network.”
Jan Zijderveld, CEO of Avon, said, “This combination is the start of an exciting new chapter in Avon’s 130-year history. It stands as a testament to the progress of our efforts to ‘Open Up Avon’, and we believe it will allow us to significantly accelerate our strategy and further expand into the online channel. Over the past year, we have started a transformation to strengthen Avon’s competitiveness by renewing our focus on Her, simplifying our operations, and modernizing and digitizing our brand. Together with Natura, we will have broader access to innovation and a portfolio of products, a stronger e-commerce and digital platform, and improved data and tools for Representatives to drive growth and enhance value for shareholders. Further, with the support of Natura, we will continue to invest in cutting-edge technology to enhance our digital capabilities and productivity for our Representatives. Both Avon and Natura are purpose-driven organizations, and the combination will enable us to better serve our millions of Representatives, leveraging Avon’s international presence with the same strongly-held commitment to enhancing Her experience and earnings.”
As part of this transaction, a new Brazilian holding company, Natura Holding S.A., has been created. Upon closing, Natura Holding S.A.s’ stock will be listed on B3 with a 55 percent public float and it will also have ADRs listed on the NYSE. Avon shareholders will have the option to receive ADRs traded on the NYSE or shares listed on B3. Further information is available in the Material Fact which can be accessed here.
Upon closing, the Board of Directors of the combined company will consist of 13 members, three of which will be designated by Avon. The transaction remains subject to customary closing conditions including approval by both Natura &Co’s and Avon’s shareholders as well as anti-trust authorities in Brazil and certain other jurisdictions.