Coty Walks Away from Avon

Last month, Coty offered to buy Avon Products ($AVP) for $23.25 per share. Avon’s stock had been at $19.36, but despite the premium, the company shot the offer down. Coty then raised the price to $24.75 per share and set a take-it-or-not deadline.

This is where it gets strange. Avon asked for a deadline extension, and Coty has now withdrawn the bid. Apparently, Avon didn’t “engage” with Coty, which would upset me as well. I don’t think people are telling us the full story, but something happened that soured the Coty folks on Avon.

My take is that this was a lousy deal for Coty, and Avon should have taken any price they could have gotten. According to the world’s simplest stock valuation tool, Avon should be worth half its market price.

Overvalued companies shouldn’t get greedy (for that matter, neither should undervalued companies). Four years ago, Yahoo ($YHOO) turned down Microsoft’s buy-out offer of $31 per share. Yahoo got greedy and wanted more. Microsoft raised their bid to $33 per share and Yahoo still said no. I said this was a bad move. Today, Yahoo’s stock is trading for half that amount.

Posted by on May 15th, 2012 at 9:49 am


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