Avon Makes Deal With Activist Investors to Avoid Proxy Fight
March 28 2016 - 8:10AM
Dow Jones News
Avon Products Inc. has settled a skirmish with activist
investors that will enable the embattled beauty-products company to
sidestep a proxy fight.
Avon announced Monday morning 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.
Avon also announced Monday that it has appointed 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.
As part of the agreement, the Barington-NuOrion group, which
owns more than 3% of Avon, won't mount a fight for board seats at
the May 26 annual meeting. The group will withdraw its director
nominees and will vote all its shares in favor of the nominees
proposed by the Avon board.
The agreement comes as a deadline for the investors to launch
such a fight arrived, and after they had privately submitted their
nominees.
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 turnaround 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 over 50% in the past 12 months, despite a
strong rally since January. Avon shares closed 2.3% lower at $4.28
Thursday and were inactive in premarket trading Monday. 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 then 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 unit of 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 28, 2016 07:55 ET (11:55 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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