Beauty news sites have already been buzzing with the news, but now it’s official — Natura & Co has announced in a press release that it is acquiring Avon Products, Inc.

Natural & Co adds Avon to a portfolio that already includes Natura, The Body Shop and Aesop brands.

The all-share transaction “is creating the fourth-largest pure-play beauty group in the world and a major force for good in the industry,” the company states. 

The group will hold leading positions in relationship selling through Avon´s and Natura’s over 6.3 million Consultants and Representatives, a global footprint through 3,200 stores, as well as an expanded digital presence across all companies.

The combined Group is expected to have annual gross revenues of over US$10 billion, over 40,000 associates and be present in 100 countries.

Upon closing, the Board of Directors of the combined company will consist of 13 members, 3 of which will be designated by Avon. The transaction remains subject to customary closing conditions including approval by both Natura &Co’s and Avon’s shareholders as well as anti-trust authorities in Brazil and certain other jurisdictions. Closing is expected in early 2020.

Roberto Marques, executive chairman of Natura & Co comments:

“Following the acquisitions of Aesop in 2013 and The Body Shop in 2017, Natura & Co is taking another exciting, decisive step to build a global, multi-brand, multi-channel, purpose-driven Group.  Avon is an amazing company, an iconic brand, with passionate associates and over five million Representatives who also believe in the power of relationships. Together we will enhance our growing digital capabilities, our social network of Consultants and Representatives and leverage our global store footprint and distinctive brands, connecting, touching and influencing millions of consumers with different profiles daily, making our Group unique and creating a formidable platform for growth.”

Jan Zijderveld, CEO of Avon, states:

“This combination is the start of an exciting new chapter in Avon’s 130-year history. It stands as a testament to the progress of our efforts to ‘Open Up Avon’, and we believe it will allow us to significantly accelerate our strategy and further expand into the online channel…Together with Natura, we will have broader access to innovation and a portfolio of products, a stronger e-commerce and digital platform, and improved data and tools for Representatives to drive growth and enhance value for shareholders. Further, with the support of Natura, we will continue to invest in cutting-edge technology to enhance our digital capabilities and productivity for our Representatives.”

A Synergistic Mission

Avon and Natura were both founded by mission-driven individuals, reaching customers through a force of independent, primarily female micro-entrepreneurs, who act as brand ambassadors and beauty advisors.

Avon is an iconic brand with a heritage of over 130 years and is the world’s leading relationship selling beauty platform. Its strong brands across key beauty categories and competitive positions in a number of markets give it significant potential for future growth.

Natura & Co expects the combination to result in target synergies estimated at US$150 million to US$250 million annually, some of which will be reinvested to further enhance capabilities in digital and social selling, research & development and brand initiatives and to continue to grow the Group’s geographic footprint.

Luiz Seabra, co-founder, Natura, states:

“We have always looked at Avon with respect and admiration. Natura was founded on its passion for beauty and relationships, and today’s transaction creates a major force in the direct-to-consumer space. 

Seabra continues:

“Direct selling was a social network before the word even existed, and the arrival of technology and globalization only multiplied opportunities to connect with consumers in a meaningful way. The peer-to-peer sales model is evolving towards social selling and the power of digital allows the group to go beyond providing products and advice, and advances women empowerment, through financial independence and enhanced self-esteem.” 

He concludes:

“We believe that business can be a force for good and together with Avon, we will amplify our pioneering efforts to bring social, environmental and economic value to an ever-expanding network.”

 Zijderveld adds:

“Both Avon and Natura are purpose-driven organizations, and the combination will enable us to better serve our millions of Representatives, leveraging Avon’s international presence with the same strongly-held commitment to enhancing Her experience and earnings.”

The Specifics

As part of this transaction, a new Brazilian holding company, Natura Holding S.A., has been created. Based upon the fixed exchange ratio of 0.300 Natura Holding shares for each share of Avon common stock, Natura &Co’s shareholders will own approximately 76% of the combined company, while Avon common shareholders will own approximately 24%.

Based on Natura’s undisturbed closing price on March 21, 2019, one day prior to Natura issuing the Material Fact confirming negotiations between Avon and Natura, the transaction represents a 28% premium to Avon shareholders and implies a 2018 EBITDA multiple of 9.5x or 5.6x assuming the full impact of Natura’s expected synergies. 

Based on closing prices on May 21, 2019, the transaction values Avon at an enterprise value of US$3.7 billion and the combined group would have an enterprise value of approximately US$11 billion.

Upon closing, Natura Holding S.A.’s stock will be listed on B3 with a 55% public float and it will also have ADRs listed on the NYSE. Avon shareholders will have the option to receive ADRs traded on the NYSE or shares listed on B3. Further details for investors are here in Spanish.

UBS Investment Bank and Morgan Stanley acted as financial advisors to Natura &Co. Goldman Sachs acted as financial advisor to Avon and PJT Partners acted as financial advisor to members of the Avon Board of Directors.