This article is part of a Real Money series on 20 companies investors should consider adding to their distressed watch list.
Avon Products (AVP), whose shares have fallen 44% over the past 12 months with cash pouring off its books, unveiled its latest turnaround plans Monday. (Avon is a member of Real Money's 20-member 'Stressed Out' watch list.)
In hopes of dodging a proxy fight with dissatisfied shareholders, the company said in a statement it will permit a Baringston Capital-led investor group -- owners of an aggregate 3% of Avon's market cap -- the rights to approve an independent director.
The company simultaneously announced the election of the former CFO of FedEx's (FDX) Express unit Cathy Ross, to its board of directors. She is expected to serve on Avon's audit committee.
"I'm extremely pleased to have Cathy join the Avon Board and know that she will be a valuable addition," Avon CEO Sheri McCoy said in a statement. "Her strong leadership, finance and operational experience will allow her to make immediate contributions as we continue to execute the company's transformation plan."
Despite its battered market cap over the last 12 months -- which ha been nearly halved over the period to $1.93 billion as of opening trading Monday -- Avon shareholders have found some relief in 2016 from last December's $435 million cash infusion from private equity firm Cerberus Capital evidently taking its proposed effect: delighting shareholders through debt pay-downs and savings tied to the spinoff of Avon's North American operations. (Shares are up 12% on the year, in part due to expected cost saving through cutting 2,500 amid its transatlantic move.)
Cerberus is now the owner of New Avon LLC -- essentially the remnants of Avon's U.S. operations -- as the cosmetics company uproots its headquarters from New York to the U.K. (Avon has stated it continues to maintain a roughly 20% ownership stake in New Avon LLC.)
And the resolved negotiations with the Barington-led shareholder contingent could be a sign of more benefits to come from activist intervention throughout the year, especially with $2.2 billion debt burdens looming and $541 million in net losses posted over the past 12 months.
"We are pleased to have reached this settlement agreement with Barington, which allows us to avoid a potential proxy contest," Avon's non-executive chairman Chan Galbato said. "We have a process underway to identify the additional independent board member and we look forward to working with Barington to complete that process. The Avon board and management team continue to be fully engaged in executing the company's transformation plan for the benefit of all shareholders."
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