Cerberus to invest $605m in Avon and Avon North America

Cerberus Capital Management has agreed to acquire a 80.1% stake in Avon North America, which will be separated from Avon Products.

The private equity firm will also make a $435m convertible perpetual preferred stock investment in Avon Products.

Cerberus will buy the Avon North America interest for $170m. Avon North America will take control of around $230m of long-term liabilities from Avon Products, which will be partially compensated with $100m cash from Avon.

The transaction is expected to be completed in the spring of 2016. The Avon North America business will be separated into a privately-held company that includes the US, Canada, and Puerto Rico.

Avon said the partnership with Cerberus will provide it strategic, operational and financial benefits.

The new company will sign a licensing agreement with Avon to use the Avon brand, the Avon product portfolio and other intellectual property.

A transition services agreement will include IT and research and development.

Avon Products CEO Sheri McCoy said: "We believe this partnership and structure will also accelerate profitable growth in the remaining Avon portfolio – which represented approximately 86% 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.

"The capital infusion from Cerberus, alongside the suspension of the dividend, and additional operating efficiencies provide us the needed financial flexibility to implement operational and capital plans that fully support the international business."