Avon Products Inc. (AVP:US)’s Andrea Jung, the face of the door-to-door cosmetics seller for 13 years, will step down as executive chairman after a tenure that encompassed slumping earnings (AVP:US), a foreign-bribery investigation and a takeover attempt.
Jung, 54, who was chief executive officer from 1999 until April, will leave at the end of the year and continue as a senior adviser to the board beginning on Jan. 1., New York-based Avon said yesterday in a statement. Fred Hassan, a lead independent director, will succeed her and become non-executive chairman.
The departure marks the end of an era for Avon, which appointed Jung as its first female chief executive. The elegant Jung, leading a largely female sales representative force, touted the cosmetics giant as “the company for women.” Jung’s background was in marketing, not operations, which became a liability once the company began to struggle and grapple with an overseas bribery probe.
“Given the sour taste that the last several quarters of her tenure left in some people’s mouths, I’d view this as a positive for the stock overall,” Rommel Dionisio, an analyst at Wedbush Securities in New York, said yesterday in a telephone interview. Dionisio recommends holding the shares.
Avon rose (AVP:US) 7.2 percent, the most since May 9, to $17.39 yesterday. The shares have dropped 0.5 percent this year.
Avon said in December that Jung would relinquish the CEO position, replacing her with Sherilyn McCoy. The company has posted three straight years of declining profit (AVP:US), and in August McCoy said Avon is working to cut costs, re-evaluate the company’s markets and work to boost incentives for top sales representatives.
The company rebuffed a takeover offer from Coty Inc. (COTY:US) earlier this year. Coty, the maker of perfumes by Beyonce Knowles and Heidi Klum, withdrew its sweetened $10.7 billion bid for Avon on May 14, citing delays by Avon and unwillingness to engage in negotiations.
Richmont Holdings Inc., a closely held investor in consumer brands, is working on a proposal to take a stake in Avon, a person with knowledge of the situation said last week. Richmont had approached Avon about buying part or all of the company before Coty withdrew its offer for Avon, two people said at the time. They asked not to be identified because the matter is private.
Richmont’s chairman and founder, John Rochon, has served as chief executive officer of door-to-door cosmetics seller Mary Kay Inc. and attempted to take over Avon in the late 1980s and early 1990s, acquiring 22 percent of its stock at the time.
Hassan, who joined the board in 1999 and has been lead director since 2009, has a history as a dealmaker. As CEO of Schering-Plough Corp., he sold the drugmaker to Merck & Co. in 2009 for $51 billion.
In 2000, Hassan engineered Pharmacia & Upjohn’s $37 billion takeover of Monsanto Co. (MON:US), forming Pharmacia Corp., then three years later sold Pharmacia to New York-based Pfizer Inc., the world’s largest drugmaker, for $58 billion.
Hassan has done well for shareholders in those previous deals, Les Funtleyder, president of the investment advisory division at Poliwogg, said yesterday in a telephone interview.
“You would definitely be nervous being on the other side of the table” from Hassan in a negotiation, he said.
Jung, attired in designer-label clothing, her signature pearls and red lipstick, was a celebrity and women’s advocate as well as an executive. She also helped raise more than $800 million for Avon’s charitable programs, focused on breast cancer research and fighting violence against women.
Pressure on Jung mounted earlier this year. Avon directors debated for three weeks whether to fire her before deciding to remove her as CEO and retain her as chairman, two people familiar with the matter said in February. Avon’s nine independent directors decided Jung should stay on because she was the well-known face of the company, said the two people, who declined to be named because the matter is private.
Many Avon board members worked closely with Jung for much of her tenure, drawing criticism from corporate governance consultants. Moreover, the board gave her more latitude than most chief executives. Typically CEOs sign two-year or three- year contracts. Until this year, Jung’s was open-ended and renewed again and again.
Now that Jung is leaving, “we would anticipate further changes to the board,” Ali Dibadj, an analyst at Sanford C. Bernstein & Co. in New York, said in an e-mail.
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