Avon Products, Inc. has announced it has entered into a definitive agreement with TheFaceshop Co., Ltd., a subsidiary of LG Household & Health Care Ltd., one of Asia's largest consumer goods and beauty companies.
TheFaceShop will acquire all of the shares of Avon's Beauty manufacturing operation in Guangzhou, China. Net proceeds to Avon will be $44 million.
The companies also agreed to enter into a manufacturing and supply agreement, under which the Guangzhou factory will manufacture products for Avon's fast-growing Chinese business and other markets, while maximizing the capacity of the plant for its own production. Avon's associates at the facility will remain with the operation.
These agreements are another step in Avon's strategic shift to opening up its business mindset with best in class partners to efficiently manufacture and deliver products, in service of the millions of beauty entrepreneurs and their customers around the world.
Jan Zijderveld, CEO of Avon, said, "This transaction is a significant step forward in our efforts to 'Open Up Avon' by operating more efficiently, with a leaner, more agile global infrastructure. This agreement provides us with greater operational and financial flexibility, while allowing us to benefit from the local knowledge, world-class products, R&D expertise and infrastructure of internationally-recognized partners such as LG H&H."
Zijderveld continues, "By operating with a local structure that fits our purpose, we will be better positioned to capture the significant opportunity in China and the wider Asian market. We know LG H&H well and believe that they will continue to be a strong partner for Avon as we collectively seek to grow our business in the region."
Suk Cha, CEO of LG Household & Health Care, adds, "Our past interactions with Avon provide us a sound understanding of its brand power and global reach, and we look forward to continuing our relationship with Avon as we both explore ways to grow our product lines, bring desirable products to market faster, and each accelerate our growth across Asia."
The transaction is expected to close by February 2019 following customary local regulatory approvals.