Avon Products is close to reaching a deal with a pair of activist investors over board representation. The company who earlier this month said that it will cut about 2,500 jobs worldwide and shift its corporate headquarters to Britain as part of a three-year turnaround plan, is expected to announce today that it has reached an agreement with Barington Capital Group LP and NuOrion Partners AG that will allow them to approve a new independent director for the company's board.
The investment group Barington Capital, who sent an open letter to Avon Chairman Douglas Conant calling for restructuring said in a statement on Monday that it believed "there is still much more that needs to be done to improve the business."
In December, investors led by Barington proposed a restructuring of Avon, saying they had lost confidence in the cosmetic maker's leadership. Barington added on Monday that it continued to believe Avon needed to add new independent directors.
Avon is expected to appoint former FedEx Corporate executive Cathy Ross to its board, a move the investors endorse. After the appointment of Ms. Ross and the other director, Avon's board would have 11 members.
In recent years, as consumers have turned away from the direct sales for which the company is famous and moved toward the Internet, and as the cosmetics industry has become more competitive, Avon stock has plunged. The shares have fallen more than 50% in the past 12 months, in spite of a strong rally since January. Avon shares closed down 2.3% at $4.28 on Thursday. Its market value now stands at about $1.86 billion.
After years of declining revenue and a battered stock price, the roughly 130-year-old company this month sold its North American operations to turn-around specialist Cerberus Capital Management LP.
In the transaction with Cerberus, the investment firm got to name three directors. That included the appointment of Chan Galbato, chief executive of a Cerberus affiliate, as nonexecutive chairman. Avon and Cerberus said at the time that they would jointly select two additional independent directors. The Barington-NuOrion group has the right to approve the appointment of one of those.
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