Avon’s stock rallies on Natura deal

Shares of Avon Products Inc. (NYSE: AVP) are continuing their rally from a day ago when the company announced its acquisition by Brazilian cosmetics firm Natura & Co. The stock was up 7% in morning hours on Thursday. It had climbed as much as 12% earlier in the day.  

On Wednesday, Natura announced it was acquiring Avon in an
all-stock transaction. The offer of 0.30 Natura Holding shares for each share
of Avon common stock values Avon at more than $2 billion. The transaction is
expected to be completed in early 2020 and will create the fourth-largest beauty
company in the world.

A new Brazilian holding company, Natura Holding S.A., has
been created for the deal. Natura shareholders will own approx. 76% of the
combined company while Avon shareholders will own around 24%. The combined
company is expected to have annual gross revenues of over $10 billion and a
geographic presence spanning 100 countries.

Natura expects the deal will generate annual synergies in
the range of $150 million to $250 million which will be reinvested in R&D
initiatives and expansion efforts.

Earlier this month, Avon reported its first quarter results
in which total revenue declined 15% year-over-year to $1.18 billion. The
company reported a wider net loss of $32.7 million, or $0.09 per share, versus
the prior-year period.

Avon’s stock has gained 150% year-to-date and looking at the past one year, shares have climbed 97%.

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