US beauty products maker Avon Products Inc today said it had rejected a $10-billion unsolicited takeover offer from Coty Inc, the world's largest fragrance company.

Coty, known for creating fragrances for celebrities like David and Victoria Beckham, Beyonce Knowles and Jennifer Lopez, offered $23.25 per share, a 20-per cent premium to Avon's closing price of $19.36 on 30 March.

The Paris and New York City-headquartered Coty said it today went public with the offer after it was unsuccessful in engaging Avon in buyout talks. It said that it had offered $22.25 per share in early March, but had no plans of pursuing a hostile takeover.

The over a century-old fragrance manufacturer that also produces cosmetics and other health and beauty aids, said that the merged company would be called Avon-Coty.

Coty develops and manufactures beauty care products that include fragrances, toiletries, and colour cosmetics, and skin care, sun care, and personal care products.
Its Jennifer Lopez perfume has raked in $1 billion in sales since being introduced in 2002.

With annual turnover of around $4 billion, privately-owned Coty is trying to buy a company, whose turnover is more than double its own. Avon had revenues of $11.2 billion in 2011.

In a letter to Avon's current chairman and CEO Andrea Jung, Coty chairman Bart Becht wrote that his company is attracted to Avon's door-to-door distribution channel and its potential combination with Coty's own mass beauty brands.

Becht also said that the latest offer is "a full and fair one,'' and will only increase it if Avon could prove that its value is more that the information that is publicly available on the company.

"If you can demonstrate that there is greater value than is apparent from publicly available information, we would be prepared to consider increasing the price of our proposal," Becht wrote.

Coty plans to fund the deal through debt financing from JPMorgan Chase and equity financing from BDT Capital.

Avon, which lost about 30 per cent of its value in the past year due to declining sales and by an ongoing investigation into allegations of bribery by its executives in China, has rejected Coty's latest offer saying that it is not in the best interest of Avon's shareholders.

Avon said Coty's offer is non-binding and is subject to numerous conditions such as financing, due diligence and the negotiation of a definitive agreement.

Coty's letter also states that it reserves the right to raise or lower its price after conducting due diligence. Avon said that Coty is ''attempting to obtain a "free look" at Avon in the absence of any commitment whatsoever to close a transaction at any price.''

Avon believes that Coty's offer of only a 20 per cent premium, does not reflect the fundamental value of the company and its global beauty care franchise.

It said that the offer represents a multiple of only 1.1 times Avon's net revenue for the fiscal year 2011 and 8.7 times 2011 EBITDA, which is significantly below multiples that Avon believes being an iconic consumer company is worth.     

New York-based Avon, which sells its products to women in more than 100 countries, is currently on the look out for a new CEO in order to replace Jung, who at 53 has headed the company since 1999, making her the longest-serving female CEO currently in the Fortune 500 league.

Jung, who also is on the boards of technology giant Apple and General Electric, has come under fire from investors after the company's stock fell 30 per cent last year and around 45 per cent so far this year.

Investor pressure to make a change at the top became more intense after a disastrous third-quarter earnings report in which Avon said it faces the US Securities and Exchange Commission inquiries.

Analysts also questioned Jung's management skills after Avon's last quarter results were marred by the failed implementation of a new computer system in its key Brazilian market. They also ridiculed her sales targets as unreachable.

Coty sells its products through a network of department stores, specialty retailers, upscale perfumeries and pharmacies, mass-market retailers, and duty free shops in airports and cities in Europe, North America and Asia.

The 1904 founded company has manufacturing facilities in the UK, the US, Spain and France, and a research and development facility in Monaco, Morris Plains and New Jersey.

Coty operates as a subsidiary of Joh A Benckiser GmbH, the German holding company that manages the interests of the Reimann family of Germany, who also own more than 15 per cent in Reckitt Benckiser, the world's largest maker of household cleaners.