Avon Nears Deal With Activist Investors to Avoid Proxy Fight
March 27 2016 - 9:00PM
Dow Jones News
Avon Products Inc. is nearing the settlement of a skirmish with
activist investors that would enable the embattled beauty-products
retailer to sidestep a proxy fight.
Avon plans to announce as early as Monday that it has reached an
agreement with Barington Capital Group LP and NuOrion Partners AG
that will allow them to approve a new independent director for the
company's board, according to people familiar with the matter.
The Barington-NuOrion group, which owns more than 3% of Avon,
wouldn't mount a fight for board seats at the May 26 annual meeting
as part of the expected agreement.
The agreement comes as a deadline for the investors to launch
such a fight arrived, and after they had privately submitted their
nominees, the people added.
Avon also plans to appoint former FedEx Corp. executive Cathy
Ross to its board, a move the investors endorse. After the
appointment of Ms. Ross and the other director, Avon's board would
have 11 members.
The agreement will give Avon some peace following a tumultuous
several months for the company. After years of declining revenue
and a battered stock price, the roughly 130-year-old company this
month sold its North American operations to turn-around specialist
Cerberus Capital Management LP. Cerberus agreed to inject $435
million into Avon and invest $170 million in the North American
business. Two weeks ago, the company said it would cut about 2,500
jobs, or some 7% of its workforce, and move its corporate
headquarters to the U.K.
Barington and NuOrion, which unveiled their Avon campaign in
December as the Cerberus deal was coming together, had been urging
changes in the company's board and leadership aimed at spurring a
turnaround. The activists called for $500 million to $700 million
in cost cuts—above the $350 million the company had
targeted—largely by simplifying Avon's management structure and
freeing global operations to make decisions on their own.
The activists also wanted the company to focus on international
markets and to expand its presence in bricks-and-mortar stores and
online, and to renew its dedication to beauty products, rather than
items like decorations and home goods.
In recent years, as consumers have turned away from the direct
sales for which the company is famous and moved toward the
Internet, and as the cosmetics industry has become more
competitive, Avon stock has plunged. The shares have fallen more
than 50% in the past 12 months, in spite of a strong rally since
January. Avon shares closed down 2.3% at $4.28 on Thursday. Its
market value now stands at about $1.86 billion.
In the transaction with Cerberus, the investment firm got to
name three directors. That included the appointment of Chan
Galbato, chief executive of a Cerberus affiliate, as nonexecutive
chairman. Avon and Cerberus said at the time that they would
jointly select two additional independent directors. The
Barington-NuOrion group has the right to approve the appointment of
one of those.
Based in New York and run by James A. Mitarotonda, Barington has
had success with retail companies including Jones Group Inc. and
Dillard's Inc. NuOrion was formed in 2014 to invest in troubled
companies. Its investments are funded by wealthy families on a
deal-by-deal basis. It was founded by Guy Phillips, former head of
the global consumer and retail investment-banking business at UBS
Group AG.
Write to Dana Cimilluca at dana.cimilluca@wsj.com and David
Benoit at david.benoit@wsj.com
(END) Dow Jones Newswires
March 27, 2016 20:45 ET (00:45 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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