Moody's: Coty bid for Avon is credit negative

Moody's Investors Service said that Avon Products, Inc.'s disclosure that its board of directors received a non-binding proposal to acquire the company's equity for roughly $10 billion or $23.25 per share from Coty, Inc. is a negative credit development for the company, although the A3 rating and negative outlook remain unchanged.

Although the offer has been formally rejected and Coty has indicated that it would not pursue the acquisition on a hostile basis, Moody's said that credit and event risk increased at a time when Avon's operating and financial profile is under pressure.

The company's turnaround could be delayed given the potential for heightened management distraction, possible loss or inability to attract new Avon representatives, or any delay in implementing important critical restructuring initiatives, the agency said.

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