The owner of the beauty brand Avon in the UK, Europe and Latin America has filed for bankruptcy as it tries to off-load more than $1bn of debt, including millions of dollars in liabilities linked to lawsuits alleging that talc in its products caused cancer.
Avon Products Inc (API), a subsidiary of Brazil’s Natura which bought Avon’s non-North American trading businesses in 2020, has filed for Chapter 11, the American version of administration.
API said that the process would allow it to address its debt obligations in an “orderly manner”. Natura has proposed to buy back its trading operations outside the US for $125m (£97m) after the bankruptcy process is complete.
API has already spent $225m in costs defending itself against personal injury lawsuits and settlement payments and said it does not have “sufficient liquidity” to defend or settle the 386 individual talc-related cases. The company has total debts of $1.3bn and liabilities relating to talc claims worth $78m.
Avon’s beginnings trace back more than 135 years to David H McConnell, a travelling book salesman from New York. In the UK it was known for its “Ding dong! Avon Calling” advertising slogan, which was retired in the 1960s, and door-to-door sales agents.
Late last year, the company said it planned to open its first physical UK stores with its sales representatives running the “mini beauty boutiques” as franchisees.
Avon’s operations, including its Northampton-headquartered UK arm, will continue to trade and no job cuts are expected as part of the process.
The Avon operations linked to API have 5,000 directly employed staff, as well as millions of sales agents worldwide.
John Dubel, API’s chair, said: “Today’s action and the proposed sale of Avon’s non-US operations will maximise the value of our assets and enable us to address our obligations in an orderly manner.”
Kristof Neirynck, the chief executive officer of Avon, said: “We remain focused on advancing our business strategy internationally, including modernising our direct selling model and reigniting the brand to accelerate growth.”
Natura said it would support the bankruptcy process with up to $43m in funds and had also put forward a $125m bid to buy back the trading operations in Europe, Asia and Latin America.
That bid will be subject to a court-supervised auction process. If Natura is successful it will control Avon’s businesses, shorn of their debts, and plans to write down $530m of the $1.27bn it is owed.
Avon is the latest company to seek bankruptcy in an attempt to deal with lawsuits linked to talc. Johnson & Johnson tried to settle lawsuits using bankruptcy several times but has yet to succeed.
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The bankruptcy of API follows a difficult time for Natura, which built up heavy debts after it spent an estimated £1.6bn on buying Avon’s non-North American business.
Natura sold off The Body Shop, its UK-based ethical beauty business in November 2023. That business was put into administration less than three months later by its new owners and is expected to be taken over by a consortium led by investment company, Auréa, this month.
Natura also sold off Aesop, the Australian luxury group, last year for A$3.7bn (US $2.5bn) as part of its efforts to clear debts.
Natura had been planning to demerge its Avon business but the process has been put on hold during the Chapter 11 process.
The South Korean consumer goods company LG Household & Health Care owns the Avon brand in North America, which is not part of the bankruptcy.