Natura Cosméticos, the Brazilian company that owns The Body Shop, has agreed to buy Avon Products in an all-stock deal that values the US-listed group at more than $2bn, according to people with direct knowledge of the matter.

The São Paulo-based company would end up owning about 76 per cent of the combined group, while the remainder would be owned by Avon shareholders, the people said.

The proposed deal, which has been in the works for several months, was set to be announced on Wednesday morning, one person said.

Avon has struggled in recent years and in January was forced to cut 2,300 jobs. The equity value of the New York-listed group has dropped dramatically, and was about $1.4bn based on the stock’s closing price on Tuesday.

The company that pioneered the direct-selling model has fallen behind rival cosmetic brands that more quickly adapted to a market disrupted by social media.

London-based Avon has lost market share to savvier competitors such as LVMH-owned Sephora, Estée Lauder and L’Oréal.

The beauty industry has been thriving as millions of teenagers first scout for new beauty products on Instagram and later acquire their favourite items online or in bricks-and-mortar stores.

Natura, which has been eyeing opportunities to expand globally, believes it can revive the fortunes of the US company historically known for its doorstep Avon Lady sellers. By buying Avon, Natura will be able to further expand internationally, particularly in Asia, Europe and Latin America.

Three years ago Avon decided to spin off its North America business, which is controlled by private equity group Cerberus Capital. The spun-off company took on $230m of Avon’s long-term liabilities, a move that made it easier to sell the company to Natura.

READ ALSO  Vaccines won’t get us back in the office any time soon

The South American group acquired The Body Shop in 2017 from L’Oréal and has been focusing on boosting the UK retailer’s footprint globally.

Natura, which also owns Australia’s Aesop brand, was founded by Luiz Seabra in 1969, and is best known for being one of the world’s most sustainable companies. It sources a lot of its materials from the Amazon, where it works closely with indigenous people and local farmers.

Via Financial Times