Avon Products Inc.'s stock price soared Tuesday after reports indicated the company has entertained sale talks.
In midday trading, Avon's stock was up about 11 percent, to $2.32 — raising its market cap to more than $1 billion.
Brazilian direct seller Natura is said to have approached the business about a deal, according to a report by The Wall Street Journal. A spokesman for Avon said that the company does not comment on rumor and speculation. Natura did not immediately respond to a request for comment.
The speculation comes shortly before Avon's investor day on Friday, when chief executive officer Jan Zijderveld is expected to unveil his turnaround plans for the business.
Zijderveld, a Unilever veteran, was appointed to the ceo post back in February. Since he took the helm, he's focused largely on Avon's digital initiatives, hiring key executives, and on the company's experience for its sales representatives. One of Avon's new projects is an e-brochure, which can be updated continuously as products launch and sent via messaging services from representatives to customers.
“If you think about the end point, a digital social-selling beauty company — that’s the destination,” Zijderveld said last month.
If the company were to do a deal, DA Davidson analyst Linda Bolton Weiser estimated the takeover price at $7.75 a share — about $3.4 billion. That estimate was based on Avon's valuation when it was fielding takeover interest from Coty Inc. back in 2012 — and since then, the company has struggled to turn itself around.
"We doubt that the board and Cerberus would find it prudent to sell when the share price is around $2, having reached a low based on a trend of deteriorating top-line growth," Bolton Weiser wrote in a research note. "Natura perhaps sensed the last opportunity to make a run at before Zijderveld presents his strategy."
Another financial source noted that Avon has already pursued M&A options.
"The truth is, this thing has already been shopped every which way to Sunday, and I don't know why all of a sudden Natura would want it," said one financial source. "The price is much lower, and in theory you could blow it out in retail through The Body Shop and maybe see some synergies there, but the brand is in a tough spot and doesn't have the ability to price up, which makes it harder to be successful in beauty these days."
For more from WWD.com, see:
Jan Zijderveld Aims to Build a New Avon
Amazon Can Be Marketing Tool for Skin-care Brands
Lily Aldridge is Developing a Digital-First Fragrance Line
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Avon Stock Gains on Sale Rumors
