Shares of Avon Products Inc. fell almost 10 percent Tuesday after the smaller beauty products maker Coty Inc. dropped its $10.7 billion takeover bid.
Privately held Coty first made an offer for Avon Products public on April 2, and the relationship was contentious from the start. Avon said that offer was too low, and Coty said it needed to look at Avon's books before it made a definitive offer.
Coty raised its bid last week by about 6.5 percent, to $24.75 per share from $23.25 per share, and said billionaire Warren Buffett's Berkshire Hathaway Inc. would help finance the deal.
Coty's May 9 letter set a Monday deadline for Avon to decide. On Sunday, the door-to-door marketer said it would consider the deal and respond within a week, but Coty slammed the door shut on Monday, and investors followed suit.
At current prices, Avon is worth less than before Coty made its original offer.
Avon's shares fell $2.02, or 9.7 percent, to end trading at $18.71 on Tuesday. Before the offer was made public, the shares had risen 11 percent for the year to $19.36. They topped $23 in early April, and they've traded between $30.42 and $16.09 the past year.
Even at the original $10 billion level, the deal would have been the largest U.S. acquisition this year, according to research firm Dealogic.
Now the question is what's next for Avon, which has a new CEO _ former Johnson & Johnson executive Sherilyn McCoy _ and is struggling to turn itself around.
Morningstar analyst Erin Lash said the company will continue its strategic review.
"The new CEO hasn't been on board for even a month yet," she said. "We don't expect details overnight. The strategic review, as well as the ultimate implementation of whatever plan she puts in place, will take significant time."
Avon reported early this month that its first-quarter net income tumbled 82 percent, even more than Wall Street had feared. Falling profits have become the norm for Avon over the past three years, and it's now suffering even in places that had been strongholds such as Brazil and Russia.
The company also faces a bribery investigation that led to its vice chairman's ouster in January. The probe initially involved only executives in Asia, but it spread late last year as federal regulators began looking into the New York company's dealings with financial analysts.
Avon was founded in 1886, its "Avon ladies" selling products door to door and to friends and family. It remains one of the biggest direct-selling companies. Others include Amway Inc., Herbalife and Mary Kay. The direct-selling model is becoming less common in the U.S., but the model is thriving overseas at companies including Natura Cosmetics in Brazil and Oriflame Cosmetics in Russia. And Avon now makes the bulk of its sales outside the U.S.
"It can be a valid model in emerging and developing markets," said Morningstar's Lash. In developing markets, she said, Avon has run into supply chain problems and challenges in recruiting and retaining representatives.
Avon and Coty said Tuesday that they had no further comment about the offer.