(Reuters) - Beauty company Coty Inc said on Monday that it had offered to buy Avon Products Inc for $10 billion, but the cosmetics direct seller said it was rejecting the bid.
Coty, whose products include fragrances for such celebrities as Beyonce and Lady Gaga, said it had no plans to make a hostile bid, but had been "unsuccessful" in getting AVON (AVP.NY)to talk about its offer.
Coty, a privately held company majority owned by Joh A Benckiser, is offering $23.25 per share, or a 20 percent premium over Avon's Friday closing price of $19.36 on the New York Stock Exchange.
Avon said it was rejecting the offer because it "substantially undervalues" the company.
Shares of Avon rose 18.9 percent to $23.01 in premarket trading.
Coty said it went public with its offer after sending Avon Chief Executive Officer Andrea Jung three letters detailing the bid.
"We do not understand how your Board's unwillingness to discuss our proposal can serve the best interests of Avon's shareholders," Coty Chairman Bart Becht said in letter to be delivered to Jung on Monday morning.
Coty said it would be willing to raise its offer if Avon can show there is greater value in the company by opening its books to the company.
Shares of Avon, which is cutting jobs, had plunged nearly 50 percent over the last year and a half. The company is worth only about $8 billion today, down from an all-time peak of $21.8 billion in June 2004.
Coty said it would call the new company "Avon-Coty." It also said Avon's door-to-door direct sales model would help Coty's beauty brands.
Avon is searching for a new CEO to replace Jung, who has held the reins since 1999. But the company is facing a long decline in sales and the number of sales representatives in the United States. During the holiday period, sales in key emerging markets like Brazil and Russia fell.
(Reporting By Phil Wahba in New York; Editing by Lisa Von Ahn)
