Barington Group Cautions Against Sale Of Avon' North America Unit

(RTTNews) - An investor group led by Barington Capital Group, L.P. said that it would oppose any sale of the North America business of Avon Products, Inc. (AVP) on terms that are disadvantageous to current shareholders or limit the options for a new senior management team to maximize long-term shareholder value. It would also oppose a sale of a dilutive equity stake at a "fire sale" price. Given the Company's ample liquidity, the investor group fails to see how selling equity at or around the current stock price creates value for shareholders.

The Group noted that it has lost confidence in Avon's present leadership and intends to nominate a slate of highly qualified director candidates for the 2016 annual meeting.

"We believe that certain key elements of a typical private equity investment have the potential to be highly beneficial to shareholders, particularly where the transaction entails the addition of new independent directors and the appointment of a new senior management team. However, we are concerned that either of the alternatives discussed in the Wall Street Journal articles could destroy significant shareholder value," the investor group said in a letter to the Chairman of the Board of the Company.

The investor group includes NuOrion Partners AG and certain other investors, which collectively owns more than 3% of the outstanding shares of Avon Products, Inc.

The Barington Group believes the Company must promptly implement a restructuring plan. It has developed such a plan for Avon, which, if implemented, it believes would: eliminate wasteful and unproductive expenses, resulting in annual savings of $500 to $700 million; achieve $0.90 of earnings per share based solely on the initial impact of cost cutting and stabilizing revenues.

The Barington Group noted that it strongly believes in Avon's long-term prospects and are confident that with the right leadership in place Avon can recover its position as a leading global beauty brand. It is convinced that the addition of new independent directors to the Board is a necessary first step towards developing and executing a strategy that will unlock Avon's value potential for all shareholders.

Earlier today, the Wall street Journal reported Beauty products maker Avon Products Inc. is in advanced talks to sell its North American business to a private-equity firm Cerberus Capital Management LP.

As part of the deal, Cerberus would make a minority investment in Avon that would strengthen the company's balance sheet. Cerberus would become Avon's biggest shareholder and might get board seats, the Journal said.