By  on January 29, 2018

A group of Avon Products Inc. shareholders wants the company to consider selling itself — in whole, or in parts.Shah Capital, Barington Capital Group LP and NuOrion Partners, which collectively own about 3.5 percent of Avon, have sent a letter to the company's board of directors requesting they hire a financial adviser to explore strategic alternatives, including a sale. In a statement, the group said it was "extremely disappointed" in Avon's stock price — which has declined more than 56 percent in the past year — and that the board has been slow to hire a new chief executive officer. The current ceo, Sheri McCoy, plans to step down at the end of March. It also said shareholders should not have to keep waiting for a turnaround "from a board that has overseen such tremendous destruction of shareholder value."Avon shares were up about 13 percent Monday in pre-market trading."The shareholder group has lost confidence in the ability of Avon’s current board to create meaningful long-term value for its public shareholders, and sees no reason why shareholders should continue to wait for a turnaround from a board that has overseen a tremendous destruction of shareholder value," the investors said in a statement. "The shareholder group therefore believes that the best course of action is for the board to retain a financial adviser to explore the sale of the company."The group also ticked off some "positive attributes" about the business for potential buyers, including Avon's 130-year-old brand, its broad product assortment, strong position in emerging markets, owned manufacturing operations and six million member sales force.In the letter, the shareholder group criticized McCoy and the board for appointing her, and said the Cerberus Capital Management transaction — in which the private equity firm took over the North American part of the business and invested in the larger company — has been disappointing to public shareholders. The group contends the deal was not actually in Avon's favor, and that the company received only $6 million in cash proceeds related to the sale, and had to contribute $100 million to the North America business. Cerberus, the group said, also contributed $170 million, but to the part of the business they owned 80 percent of, not Avon. The group also said it was disappointed that certain real estate holdings were transferred as part of the deal to sell the North America business."While we were disappointed by the negligible consideration the company received for its North America business when we learned of the Cerberus transaction, we were at least hopeful that Cerberus’ involvement could be a catalyst for leadership changes and improved operating execution that would ultimately translate into improved financial and share price performance at Avon. Unfortunately, this has not transpired," the group wrote in the letter.The group also called out Avon's deteriorating financial performance, said the management team is overpaid and that the company's capital structure is inefficient.“Avon’s board of directors and management team are committed to delivering value for all shareholders, and will continue to take actions to improve performance," an Avon spokesperson said. "The board values the input of all shareholders and is executing against its roadmap to deliver profitable growth. The company is in the midst of a ceo transition which is on track to be completed on schedule as previously announced. We are confident that the changes we are undertaking will strengthen and grow the business.”

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