Avon shares up on report of possible L’Oreal bid

NEW YORK (BestGrowthStock) – Avon Products Inc (AVP.N: ) shares rose on Tuesday after the Daily Mail newspaper said French cosmetics maker L’Oreal SA (OREP.PA: ) may be lining up a cash bid for the company.

Citing market rumors, Britain’s Daily Mail said L’Oreal was getting ready to make a cash offer of more than $44 a share for the U.S. cosmetics and perfume company, or at least $18.8 billion.

Avon shares were up 2.5 percent, at $33.99 in afternoon trading after surging as high as $36.20 earlier in the day.

Representatives for both Avon and L’Oreal declined to comment. A France-based investment banker familiar with the situation said a L’Oreal bid for Avon was “unlikely.”

An offer of $44 a share would represent a premium of 32.7 percent over Avon’s Monday closing price of $33.16.

Liberum Capital said in a note to clients that it put little credence in the newspaper report, given L’Oreal’s own suggestion it would not be interested in a direct sales model, the core of Avon’s business.

However, UBS analysts said it would not be surprising for L’Oreal to be on the hunt for takeover targets, citing its low debt levels and a beauty industry that is “ripe for the next round of consolidation.”

Consumer goods group Unilever Plc/NV (ULVR.L: )(UNc.AS: ) said last month it would buy U.S. hair and skin care company Alberto Culver Co (ACV.N: ) for $3.7 billion, while Procter & Gamble Co’s (PG.N: ) chief executive caused a spike in Beiersdorf AG (BEIG.DE: ) shares when he expressed admiration for its Nivea skin cream brand and mused about a takeover in the right circumstances.

The UBS note also said buying Avon would help L’Oreal win a substantial number of consumers in emerging markets, particularly Latin America.

In July, Avon reported a higher second-quarter profit (Read more your timing to make a profit.) as beauty care sales increased. The company is scheduled to report third-quarter results on October 28.

(Reporting by Phil Wahba; additional reporting by Astrid Wendlandt, Nina Sovich and Victoria Howley; editing by John Wallace and Andre Grenon)

Avon shares up on report of possible L’Oreal bid