Reflect on Avon

 | May 14, 2012 | 7:01 AM EDT  | Comments
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While everyone is doing their usual morning freakout about Europe, a little worse this time than usual because of the Spanish 10-year going through 6%, which is obviously just a way station to 7%, perhaps take a moment out to think about the takeover battle for Avon (AVP).

Specifically, we haven't seen the last of this Coty offer for the embattled female product marketing company. This weekend, when Avon agreed to consider the offer, we got the first step of what I believe to be the repudiation of the woman who is really running the company, Andrea Jung. I am sure there are people who believe that Sherri McCoy, the woman brought in to replace Jung as CEO at a very high cost, is running the business. But any company that keeps Jung on the board, let alone allows her to be chairman, is one that is still in her pocket.

That means that Jung is in there telling the board "listen, I have a plan, and my plan is turn around the business with McCoy in charge and just say no."

The fact that the board had been saying "no" until now is a sign that the board may have more deference for Warren Buffett than it does for a woman whom many shareholders and critics have called incompetent and for a woman who had been a fixture on the "Mad Money" Wall of Shame.

You may not know the name Byron Trott, but I do. He worked with me at Goldman Sachs, a brilliant, great guy, and he is Warren Buffett's adviser on Coty's bid. That means it is not some idle exercise. It is the opposite. It is a cold, calculated bid that is meant not to be hostile, but not to be in the face of Jung so to allow the board to gracefully swing it to Coty's way.

I was amazed at how poorly the stock acted after the Buffett news. It was as if either it didn't matter because things are so dire at the company that once Coty comes in it will walk away or that Jung is still so powerful that it will take some $50 bid from Procter & Gamble (PG) to change her mind.

I think the company's still worth a lot. I do not like the so-called door-to-door model because it can be a push model where the only reason why anyone would ever own it is because it is pushed hard by someone else with the notion that the buyer would become part of the selling scheme. They don't call these pyramid schemes for nothing. And while it is true that Jung tried to offer product that was so good it could sell in stores, that didn't work either, telling you a lot about what they are peddling.

Nevertheless, now the tables seem to have been turned. Now it seems more of a win-win than it does a lose-lose. But never forget that's because of Trott and Buffett, not because of the Wild Bills of Coty.

While everyone is doing their usual morning freakout about Europe, a little worse this time than usual because of the Spanish 10-year going through 6%, which is obviously just a way station to 7%, perhaps take a moment out to think about the takeover battle for Avon (AVP).

Specifically, we haven't seen the last of this Coty offer for the embattled female product marketing company. This weekend, when Avon agreed to consider the offer, we got the first step of what I believe to be the repudiation of the woman who is really running the company, Andrea Jung. I am sure there are people who believe that Sherri McCoy, the woman brought in to replace Jung as CEO at a very high cost, is running the business. But any company that keeps Jung on the board, let alone allows her to be chairman, is one that is still in her pocket.

That means that Jung is in there telling the board "listen, I have a plan, and my plan is turn around the business with McCoy in charge and just say no."

The fact that the board had been saying "no" until now is a sign that the board may have more deference for Warren Buffett than it does for a woman whom many shareholders and critics have called incompetent and for a woman who had been a fixture on the "Mad Money" Wall of Shame.

You may not know the name Byron Trott, but I do. He worked with me at Goldman Sachs, a brilliant, great guy, and he is Warren Buffett's adviser on Coty's bid. That means it is not some idle exercise. It is the opposite. It is a cold, calculated bid that is meant not to be hostile, but not to be in the face of Jung so to allow the board to gracefully swing it to Coty's way.

I was amazed at how poorly the stock acted after the Buffett news. It was as if either it didn't matter because things are so dire at the company that once Coty comes in it will walk away or that Jung is still so powerful that it will take some $50 bid from Procter & Gamble (PG) to change her mind.

I think the company's still worth a lot. I do not like the so-called door-to-door model because it can be a push model where the only reason why anyone would ever own it is because it is pushed hard by someone else with the notion that the buyer would become part of the selling scheme. They don't call these pyramid schemes for nothing. And while it is true that Jung tried to offer product that was so good it could sell in stores, that didn't work either, telling you a lot about what they are peddling.

Nevertheless, now the tables seem to have been turned. Now it seems more of a win-win than it does a lose-lose. But never forget that's because of Trott and Buffett, not because of the Wild Bills of Coty.

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