Avon Products
~
IiItlEI
Harvard Business School
9-289-049
Rev. August 5.1994
Avon Products, Inc.
On June 1, 1988, Hicks B. Waldron, chairman and chief executive officer of Avon Products, Inc., was reviewing a package of proposals that he and his financial advisors were to present to the Avon board of directors for final approval the following day. These proposals included (1) a public announcement that Avon would explore plans to divest two of its businesses, probably at a considerable book loss; (2) a reduction of the dividend on Avon's common stock; and (3) an exchange offer under which Avon would issue an unusual preferred stock in exchange for up to 25% of its common shares.
Background
Avon Products, Inc., founded in 1886, was one of the world's largest manufacturers and marketers of beauty products. The company was famous for its direct selling beauty business, in which a sales force of independent contractors purchased products from Avon and then resold them door-to-door, largely to their friends and neighbors. In addition, by the mid-1980s , the company was an important national provider of sub-acute health care services. Avon's Beauty Group produced and sold cosmetics, fragrances, toiletries, and fashion jewelry and accessories; it also sold gift and decorative products. While it sold several fragrances through retail establishments, most of the Beauty Group's revenues were from its direct sales operations. In 1988 Avon had 1.4 million active sales representatives worldwide, including 400,000 in the United States. Avon's other principal business group was its Health Care Group, which comprised Foster Medical Corporation, the Mediplex Group, and Retirement Inns of America. They provided home health care , operated retirement living facilities, and provided certain sub-acute health care services. Exhibit 1 gives a lO-year review of Avon's financial performance, and Exhibit 2 gives data by lines of business for the period 1982-1987. Exhibit 3 shows balance
IiItlEI
Harvard Business School
9-289-049
Rev. August 5.1994
Avon Products, Inc.
On June 1, 1988, Hicks B. Waldron, chairman and chief executive officer of Avon Products, Inc., was reviewing a package of proposals that he and his financial advisors were to present to the Avon board of directors for final approval the following day. These proposals included (1) a public announcement that Avon would explore plans to divest two of its businesses, probably at a considerable book loss; (2) a reduction of the dividend on Avon's common stock; and (3) an exchange offer under which Avon would issue an unusual preferred stock in exchange for up to 25% of its common shares.
Background
Avon Products, Inc., founded in 1886, was one of the world's largest manufacturers and marketers of beauty products. The company was famous for its direct selling beauty business, in which a sales force of independent contractors purchased products from Avon and then resold them door-to-door, largely to their friends and neighbors. In addition, by the mid-1980s , the company was an important national provider of sub-acute health care services. Avon's Beauty Group produced and sold cosmetics, fragrances, toiletries, and fashion jewelry and accessories; it also sold gift and decorative products. While it sold several fragrances through retail establishments, most of the Beauty Group's revenues were from its direct sales operations. In 1988 Avon had 1.4 million active sales representatives worldwide, including 400,000 in the United States. Avon's other principal business group was its Health Care Group, which comprised Foster Medical Corporation, the Mediplex Group, and Retirement Inns of America. They provided home health care , operated retirement living facilities, and provided certain sub-acute health care services. Exhibit 1 gives a lO-year review of Avon's financial performance, and Exhibit 2 gives data by lines of business for the period 1982-1987. Exhibit 3 shows balance