By  on November 8, 2010

TOKYO — Avon Products Inc. said Monday it plans to sell its 74.7 percent stake in its Japanese subsidiary to an affiliate of TPG Capital for 7.3 billion yen, or $89.9 million at current exchange.

The transaction is expected to close in the fourth quarter. As part of the deal, TPG Capital will launch a tender offer in Japan for all outstanding shares of Avon Japan, which is publicly traded on the Osaka Securities Exchange, at the mutually agreed upon price of 74 yen, or 91 cents, per share.

Avon said it wants to focus on direct-selling markets with “high growth potential.” The company said its sales in Japan account for less than 2 percent of Avon’s total turnover and the transaction would have no material impact on its financial results. Avon Japan will be accounted for as a discontinued operation as of the fourth quarter of this year, the cosmetics company said.

“While Japan is an important consumer market, our analysis indicates that we would need to commit significant additional investment in order to generate profitable growth in the near to intermediate term,” stated Andrea Jung, Avon’s chairman and chief executive officer.

Avon said more than half of its sales in Japan are generated by direct mail, an anomaly according to the firm. Also, the company noted that a large portion of its sales were for products it created exclusively for the market.

Avon said it has agreed to grant TPG rights to its local Japan formulas and products as well as that of some other Avon products for use in Japan and, subject to “certain restrictions,” outside Japan. TPG will also have the rights to use the Avon name in Japan for an unspecified period of time.

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