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Strategies & Market Trends : Speculating in Takeover Targets
CTG 7.380+2.4%2:17 PM EDT

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To: richardred who wrote (3082)5/10/2012 10:56:37 AM
From: richardred  Read Replies (1) of 6568
Normally Warren doesn't buy broken companies, but he will lend to a prominent company for part of the action. Most likely part of CODY and above average interest rates.

Coty raises bid for Avon, has Buffett as partner

By Andria Cheng,

NEW YORK (MarketWatch) — Beauty-products company Coty Inc.,
whose $10 billion buyout offer was rejected by Avon Products Inc. last month,
said it’s raising its per-share bid by 6.5% and its financing partners will now
also include Warren Buffett’s Berkshire Hathaway Inc.

largest direct seller of beauty products, said on Thursday that its board will
consider a letter Coty sent on Wednesday “in due course.”

In the letter, Coty said it’s raising its offer to $24.75 a share from its
public bid of $23.25 last month in a “final effort to move forward with
discussions” despite Avon’s “materially weakened outlook for” its business. It
said it’s prepared to sign a confidentiality agreement and conduct a three-week
due diligence process. It added that its financing partners will only pursue its
proposal on a consensual basis.

Avon shares last week dropped after it reported a bigger-than-expected
first-quarter profit decline. Standard & Poor’s and Fitch have both cut
their credit ratings on the company.

Avon shares dipped 0.7% to $21.46 in early trading after first gaining in
premarket trading.

After Avon told Coty last week that it wasn’t prepared to engage in any talks
about any revised offer until after it completes an internal review under its
new Chief Executive Sherilyn McCoy, Coty said it’s not willing to keep its
proposal open for several months that Avon said it needs to conduct its internal

“This review can and should be done in parallel with exploring the strategic
alternative of selling the company, so the board may compare both proposals side
by side and make the right choice for Avon shareholders,” the letter said.

It also said Avon needs to respond to its revised offer by the close of
business on Monday and that it will withdraw its offer if the company chooses
not to engage with it. It also said it and its equity financing partners are
prepared to work until May 31 to see if the two sides have a “mutually
agreeable” basis for a transaction.

Coty’s financing sources include its principal shareholder Joh. A. Benckiser,
BDT Capital Partners and certain of its limited partners. J.P. Morgan Securities
will provide its debt financing.

McCoy, a former Johnson & Johnson executive, became Avon CEO on April 23
after Avon said in December that former CEO Andrea Jung will step down once the
company finds her replacement, even though she would stay on as executive

Avon had rejected closely-held Coty’s original $10 billion unsolicited bid as
“opportunistic” and “not in the best interest” of its shareholders. Analysts
have said Coty’s original offer was low compared to other deals in the industry.

Avon has struggled with declining demand in markets from North America to
Europe and a lower number of its 6.4 million active representatives, considered
key to the company’s future sales. Brazil, its largest selling country, has
suffered sales and orders disruptions due to a software update.

In February, the company said it’s intently focused on identifying
cost-cutting opportunities following years of restructuring.

The New York-based company has also suffered a setback in its credibility as
it has been plagued by government investigations over whether it violated the
Foreign Corrupt Practices Act and how it disclosed financial information to some
Wall Street analysts.

Avon has annual sales of over $11 billion. Coty — which makes Calvin Klein,
Marc Jacobs fragrances and OPI and Sally Hansen nail products for sale at
retailers from Wal-Mart Stores Inc. /quotes/zigman/245476/quotes/nls/wmt WMT
+0.56% to
Macy’s Inc. /quotes/zigman/467976/quotes/nls/m M -0.90% — has sales
of $4.5 billion.

Coty, founded in Paris in 1904 by Francois Coty, has also said it plans to
use cost synergies from the combined company to address Avon’s “operational
issues” and drive future growth.

Avon reportedly also was being eyed by Richmont Holdings, at one point Avon’s
largest shareholder before ultimately selling its stake.
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