Avon Struggles With Internet Age, Sold Company To Natura

Avon
(Photo: REUTERS/Brendan McDermid )

Natura is buying Avon, the direct-to-customer retail brand for £1.6 billion. The deal was announced on Wednesday and the Brazilian cosmetics group will now take over the once bustling direct-selling business that the Avon brand was known for.

In the press release, Avon stated that the acquisition of the company will boost online offering that is slowly replacing the direct selling scheme that made the cosmetic firm successful worldwide. However, with today's internet retailing set up, it realized the need to upgrade its system for selling to keep up with the times thus it agreed to the tie-up with Natura.

With Natura and Avon's team up, it is expected to create an annual revenue of at least $10 billion as it will also maintain its presence in about 100 countries that hold a total of 3,200 Avon store outlets, as per BBC News. The all-share deal will also make the two companies as the fourth largest beauty group worldwide and projected to become a major force in the cosmetic business sector.

Commenting on the Natura and Avon's billion dollar deal, Natura's co-founder, Luiz Seabra, said, "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."

She added, "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."

Seabra further highlighted the importance of going digital in the retail business. She acknowledged that this plays a big role in the success of any company in this era where the internet and modern technology have the immense power to make or break any business.

As part of the deal, the Natura Holding SA was created to represent both Avon and Natura. The agreement between the firms stated that the latter will own 76 percent of the merged business while the existing investors of the direct-selling company will receive 0.3 Natura share for each of the Avon shares.

Finally, the deal between Avon and Natura is expected to be completed in early 2020. Avon's CEO, Jan Zijderveld, shared that they are excited for the partnership and looking forward to a big change in the coming years.

"This combination is the start of an exciting new chapter in Avon's 130-year history," Zijderveld said. "Together with Natura, we will have broader access to innovation and a portfolio of products, stronger e-commerce and digital platform, and improved data and tools for Representatives to drive growth and enhance value for shareholders.

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