Avon's long road ahead as Coty walks away When Bart Becht left household products maker Reckitt Benckiser and became chairman of fragrance giant Coty, he might have thought the days of detergents and cleaning agents were behind him. But with Coty's withdrawal of its unsolicited $10.7bn bid for cosmetics direct seller Avon late on Monday, Mr Becht walks away from perhaps the biggest mess of his otherwise sparkling career. Coty made its initial bid for Avon in March, after talks between the two companies about a possible Avon takeover of Coty went quiet. "We turned the tables and made a bid for Avon," Mr Becht told the Financial Times last month. But the initiative was always on the Coty side. It was an ambitious gambit from the start. With $11bn of sales, Avon is more than twice the size of Coty. The US group is also plagued with operational and regulatory problems. Avon's difficulties have include disgruntled sales representatives, slumping US sales and order fulfilment problems in Brazil. It also faces fallout from bribery allegations in China and Latin America that are being probed by US regulators. Investors and analysts believed that if anyone was capable of pulling off a deal, it was Mr Becht. He became chief executive of Reckitt Benckiser when Benckiser merged with Reckitt & Colman in 1999 and made the company one of the best performers in the FTSE 100 with brands like Woolite and Vanish. He was rewarded for his work, taking home £90m in 2009. As chairman of Coty - which is majority owned by Joh. A Benckiser, a family holding company based in Luxembourg that also holds a significant stake in Reckitt Benckiser - Mr Becht saw similar opportunities for value creation. He launched Coty's bid on April 2 with a letter to Andrea Jung, who was then Avon's embattled chief executive. The "Dear Andrea" letter laid out the rationale for the deal and offered $23.35 per share for Avon, a 27 per cent premium over the stock's three month volume weighted average price. But Coty also said it had no intention of going hostile by making a tender offer or pursuing a proxy battle for control of Avon's board. That move struck many observers as a sign of half-heartedness, yet Coty maintained that it needed to perform due diligence to fully understand the state of the business, and the potential regulatory liabilities. Avon shares jumped on news of the bid, but the company immediately rejected Coty's initial $10bn offer as too low, calling it "opportunistic" and complaining that Coty had not secured financing for its bid. A week later, it announced the appointment of former Johnson & Johnson executive Sheri McCoy as its chief executive and reiterated its desire to remain independent. Coty came back two weeks later, saying it had lined up $5bn in equity financing and was confident it could raise another $9bn in debt. In a conference call with investors, Mr Becht told shareholders that "this week is the time to act and express their opinion to the Avon board." Avon quickly dismissed Coty's promises of financing and held its ground. Last week Coty raised its bid to $10.7bn and brought in Warren Buffett's Berkshire Hathaway as an equity investor. Coty had been advised by BDT - a firm founded by Byron Trott, a former Goldman Sachs partner known to be Mr Buffett's favourite banker - which was also providing equity financing. The alliance with Mr Buffett was seen as a way for Coty to force Avon to the table, and Coty said it would withdraw its offer if Avon did not engage in discussions by Monday night. On Sunday Avon said it needed another week to respond. If Avon thought Coty was bluffing with its deadline, it was wrong. Late Monday night Coty withdrew its bid, expressing frustration that Avon would not return phone calls over the weekend. Avon now faces a long road ahead as it attempts to fix its business and grapple with regulators. With Avon stock down 10 per cent on Tuesday, below the undisturbed price before the Coty bid, shareholders can only hope Ms McCoy finds success. Coty, meanwhile, came a long way only to walk away at the last minute. For Mr Becht, who made a career of knowing what people want to buy, and offering it at the right price, Avon may be the one great deal that got away. Additional reporting by Barney Jopson