Cosmetics company Avon Products Inc. (NYSE: AVP) rejected a $10 billion cash takeover offer from fragrance maker Coty Inc. - in what could be one of the first moves in a drawn out acquisition.
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Privately held Coty offered $23.25 a share for struggling Avon. That's a 20% premium to Avon's closing price Friday.
Avon turned down the bid, saying it "significantly undervalued" the company. It also said the non-binding offer was "opportunistic," and Coty was simply trying to get a "free look" at Avon's financials without a solid commitment to buy.
But industry analysts said with all Avon's problems, the company should not be so quick to dismiss a purchase offer at a premium.
"It's an opportunity that the board should seriously consider," Sanford C. Bernstein & Co analyst Ali Dibadj told Reuters.
The news that Avon could be bought out soon pushed its stock up as much as 21% to $23.34 in early morning trading.