Avon Up Huge After New Cerberus Stake

Avon Products, Inc. AVP stock was surging 22.64 percent to $5.01 on Thursday's pre-market trading on the new Cerberus deal. The company announced that Cerberus Capital Management would purchase 80 percent of Avon Products North America.

Cerberus will also invest $435 million for a nearly 17 percent stake in Avon.

The $435 million investment in Avon Products is equal to a 16.6 percent stake in the company. The company said that the investment would be in the form of convertible perpetual preferred stock, with a conversion price of $5 per share and a dividend that accrues at a rate of 5 percent per year.

Related Link: Markets Selling The News In Avon Products

Strategic Partnership

Avon Products' CEO, Sherilyn "Sheri" McCoy sees the company creating a strategic partnership that will drive shareholder value and improve Avon's performance.

"We believe this partnership and structure will also accelerate profitable growth in the remaining Avon portfolio – which represented approximately 86 percent of consolidated revenues for the nine months ended September 30, 2015 – as we focus resources on our top markets, the majority of which are profitable and growing," McCoy said in a statement.

Details Of The Deal

As part of the deal, Avon Product's North American company will be separated from Avon Products. The North American company will now be a privately held company that is managed and majority-owned by Cerberus, Avon Products said in a statement on Thursday morning.

Cerberus will designate a new chairman. The company will also secure three seats on Avon Product's board, along with naming two new independent directors.

Avon, which was valued at nearly $1.8 billion as of Wednesday's close, has been struggling to reverse a decline in sales for nearly four years, as it loses representatives – the so-called "Avon Ladies" – in the United States and grapples with weak demand in Brazil.