Avon’s Strategic Partnership with Cerberus

On December 17, 2015, Avon Products, Inc., a leading global beauty company, and Cerberus Capital Management, a New York‑based private investment firm, announced that they have signed definitive agreements to deliver long‑term value to Avon shareholders. Cravath is representing Avon in connection with these transactions.

The partnership, which has been approved by the Avon Board of Directors, includes a $605 million equity investment by affiliates of Cerberus consisting of two components:

(1) Cerberus will make a $435 million investment in Avon Products. This investment will be in the form of convertible perpetual preferred stock with a conversion price of $5.00 per share and a dividend that accrues, or is payable at Avon’s option under certain circumstances in common shares or cash, at a rate of 5% per annum. The conversion price represents a 46% premium to the 30‑day volume‑weighted average price.

(2) Avon North America will be separated from Avon Products into a privately held company majority‑owned and managed by Cerberus. Cerberus will purchase an 80.1% interest in Avon North America in exchange for a $170 million equity investment. Avon North America will also assume approximately $230 million of long‑term liabilities from Avon Products, which will be partially offset by a $100 million cash contribution from Avon.

The Cravath team includes associates Mark Mushkin, G.J. Ligelis Jr., Eric M. Wasserstrum and Andrew T. Murphy on M&A matters; partner Andrew J. Pitts on securities matters; partner Eric W. Hilfers, practice area attorney M. C. Tania Balthazaar and associate Daniel P. Herrmann on executive compensation and benefits matters; partner J. Leonard Teti II and associates Tara L. Rhoades and June Hwang on tax matters; partner David J. Kappos, senior attorney Margot A. Wagner and associate Christopher P. Davis on intellectual property matters; partner Matthew Morreale on environmental matters; partner Christine A. Varney and associate Caitlin N. Fitzpatrick on antitrust matters; practice area attorney Brian M. Budnick on real estate matters; and partners Evan R. Chesler and Benjamin Gruenstein and associate Dana Roizen on litigation matters. Daniel S. Connelly, Christopher C. Blackburn and Sarah R. Jacobson also worked on M&A matters and Peretz Riesenberg also worked on executive compensation and benefits matters.