Natura &Co Eyes Sale of Avon Outside LA

With Avon emerging from bankruptcy, a new deal may be on the way.

Natura &Co. is negotiating with IG4 Capital to sell Avon’s operations outside Latin America. In December, Natura said strategic alternatives included a sale, partnership or spinoff.

“In this context, it has been holding negotiations with IG4 for a potential sale of Avon’s operations outside Latin America,” Natura &Co. wrote in a filing with the Brazilian stock market authority. “The negotiations have been maintained on an exclusive basis, but are still at an early stage and the company continues to evaluate other strategic alternatives.”

Some analysts applauded the move.

“This is a pivotal piece on our investment thesis that banks on business simplification,” JPMorgan analysts said in a note to clients. “Our base thesis is that Natura should sell/divest from Avon Intl in the short term, following the successful API chapter 11 process, and bring to surface a strong free cash flow from LatAm, unlocking more dividends.”

A Return to Deal-Making

Natura &Co.’s efforts to seek an alternative strategy for Avon had been on hold since August when Avon Products Inc. filed for Chapter 11 bankruptcy in a Delaware court. The filing was the result of a mounting pile of debt following lawsuits claiming that its talc products caused cancer.

Natura said in the filing that the US court overseeing the bankruptcy proceedings approved the settlement agreement between Natura and the Avon Products creditor. The court also approved the deal regarding the sale of Avon operations through a credit bid of $125 million.

In February, Natura said it was mulling whether to spin off Avon International as a separate publicly traded beauty company to unlock further shareholder value. The announcement fits in with its strategy to simplify its corporate structure. In the past two years, Natura sold Aesop and The Body Shop.

L’Oréal purchased Aesop in 2023 when the Australian brand was valued at more than $2.5 billion. Natura also sold The Body Shop to private equity firm Aurelius Investment in a deal valuing the chain at 207 million pounds.

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