Avon Products Inc. has officially separated its North America business.
The deal for the company to form a strategic partnership with private equity firm Cerberus Capital Management LP has closed, giving majority ownership of the North America unit to a Cerberus affiliate. The business is now called New Avon LLC.
Under the terms of the deal, which was revealed in December, Cerberus invested $435 million in Avon for a 16.6 percent stake in the business, plus $170 million in New Avon for 80 percent of the business. Avon still owns 20 percent of the North American operations.
“Our strategic partnership with Cerberus sets Avon on a solid path to profitability and growth by providing a solution for the North America business as well as capital, focus, and resources to support Avon Products Inc. in the execution of our transformation plan,” said Avon chief executive officer Sheri McCoy. “The partnership, along with other actions we are taking, also further increases our financial flexibility. We have significant capital resources and liquidity with which to fund working capital, restructuring costs and opportunistic debt retirement.”
“Having now spent months with the company, its management team, its representatives and its associates, we are even more enthusiastic about investing in the North American representatives and business,” said Cerberus senior managing director and co-head of global private equity Steven Mayer. “Our goal is to make the direct-selling model and the representative experience more contemporary, efficient and profitable by reinvigorating the Avon brand, improving New Avon LLC’s competitiveness and positioning it for long-term, sustainable growth.”
Avon said in January that it would implement a cost-cutting plan to save $350 million over the next three years, as well as explore alternatives for its China business, which made up about 1 percent of Avon at that time. That news came at Avon’s investor day, where executives said Cerberus would continue to work with the company to try to rationalize the supply chain, modernize business processes and make decisive strategic choices.
Aside from China, Avon faces declining revenues in Latin America, in part because of high inflation. The company reported its 16th straight quarter of sales declines in February, with a $333 million net loss for the fourth quarter, up from a $331 million loss from the prior-year period.