Avon Trades Higher After WSJ Says Company Exploring Reversal Of 2016 Spin

Shares of beauty product company Avon Products, Inc. AVP gained 7 percent early Friday morning after The Wall Street Journal reported the company may be exploring a change in its structure.

What Happened

Avon sold an 80-percent stake of its North American business in 2016 to a private equity firm Cerberus Capital Management so it can better focus on the larger international operation. The company is now exploring a move that would reverse the 2016 spin amid poor sales, sources told WSJ.

A potential scenario would consist of the cosmetics company selling itself to Brazil's Natura & Co. Natura. Natura would acquire the publicly traded Avon along with the North American business, which is now operating as a separate company.

Why It's Important

Avon's stock lost more than 10 percent in reaction to its most recent earnings report that fell short of expectations. The ongoing streak of bad results makes Avon more open to a potential deal. However, the company's new CEO Jan Zijderveld has been on the job just over one year so directors aren't unanimous at this point if a sale is the most logical move.

Both Avon and Natura declined WSJ's request for comment and any potential talks remain in the preliminary stages with no guarantee of a deal.

The stock traded around $2.90 per share at time of publication.

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Posted In: Beauty ProductsCerberus Capital ManagementJan ZijderveldNaturaWall Street JournalNewsRumorsMoversMediaTrading Ideas

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