Avon’s stock soars after Cerberus buys 80% stake

23 Dec 2015 | Author: | No comments yet »

Avon Products: You Call That a Deal?.

Cerberus was a three-headed dog who guarded the entrance to hell. Indeed, we think there are some strategic alternatives for the U.S. market that might have led to a stabilization of the revenues and increased profitability for the business. Why not try selling Avon product on Amazon and other websites, including avon.com (which would leverage the brand equity and enable current Avon customers to continue to purchase the products, but would eliminate the cost of running an expensive and deteriorating direct selling network)? While we suspect Cerberus might indeed try some of these options, and we will be curious to see how they play out, our over-riding disappointment is that we think Avon could have done more to extract greater value from this asset. While there is some consolation that Avon is maintaining a ~20% stake in the U.S. business, and therefore could share in the upside of any recovery in this business, we also worry that the splitting of the Avon brand under effectively two owners introduces an element of risk, for the ways in which Cerberus might try to change the positioning of the brand or its go-to-market strategies could in fact impact the international markets that now represent the future of the Avon business.

Utilities have also struggled this year, but including a tiny gain Thursday, they have risen for four days in a row and are up 4 percent over that time. The stocks are up 55 percent and 62 percent this week, respectively. “This was one of the biggest risks confronting the industry over the last year,” said Angelica Jarvenpaa, research associate for Raymond James. Jarvenpaa said the agreement is “among the best case scenarios” for solar power because it tells companies what they can expect for the next several years.

She added that the extension will benefit the entire industry, including companies that serve homes, businesses, utilities and manufacturers of solar cells. A panel of copyright judges raised the amount that streaming companies like Pandora have to pay to record labels, but the increase was less than many had expected.

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