Coty Inc. still sees a future with Avon Products Inc.

This story first appeared in the April 11, 2012 issue of WWD. Subscribe Today.

Coty chairman Bart Becht is scheduled to speak to Avon investors on Monday, during a call hosted by Sanford C. Bernstein & Co. analyst Ali Dibadj. The call remains on the calendar, said a Coty spokesman on Tuesday, despite being scheduled prior to Avon on Monday naming former Johnson & Johnson pharmaceutical executive Sherilyn S. “Sheri” McCoy as its chief executive officer, effective April 23. McCoy, who will report to the board, takes the reins from Avon’s embattled chief Andrea Jung, who will assume the role of executive chairman.

For her efforts, McCoy will receive an annual salary of $1.2 million and a sign-on bonus of $1.9 million, according to a filing with the Securities and Exchange Commission.

She could also potentially make 150 percent of her base salary in an annual cash incentive program, as well as 600 percent her salary through a three-year cash and stock incentive plan.

If the company does have a change of control and McCoy is terminated without cause, she would be entitled to three times her salary and annual bonus.

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McCoy’s appointment prompted a number of Wall Street analysts to declare that a deal with Coty seemed more unlikely with an incoming leader to help fend off its advances.

Last week, Coty made public its $10 billion bid for the beleaguered direct seller, but Avon quickly rejected the offer. Despite Avon’s dismissal of the deal, Becht said Coty would make its case to Avon shareholders.

The central question now, said one source in contact with investors, is, “Will Coty increase its bid?”

Coty also could choose to shift its focus to another direct seller, said several financial sources. They said Coty likely considered the Brazilian direct seller Jequiti, which is currently on the hunt for a buyer. But Avon is more attractive, given its business in Asia as well.

One Wall Street analyst said Coty needs another distribution pipeline as the life cycle of fragrances, particularly those linked with a celebrity, continues to shorten.

“Coty seems intrigued by the direct selling model,” said investment banker Elsa Berry, head of Houlihan Lokey’s cross-border consumer coverage. “If Coty wants Avon, it will have to increase the price.”

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