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Avon to acquire Silpada Designs

13
Jul '10
Avon Products, Inc. announced that it has agreed to purchase all of the assets of Silpada Designs, Inc., the largest and fastest-growing direct seller of sterling silver jewelry with operations in the United States, Canada and the United Kingdom. Completion of the transaction is subject to customary closing conditions, including required regulatory approvals. The transaction is expected to close in the third quarter of 2010.

Avon said that the planned acquisition is consistent with its previously stated strategy to explore acquisition opportunities that complement its core beauty and direct selling business. In line with this, Avon said that it expects Silpada to generate incremental growth by reaching new consumers and sales representatives with a higher-priced jewelry brand. The company added that Silpada will continue to operate as a standalone business, and that its existing 32,000 independent sales representatives will be the exclusive sellers of its products through its party-plan direct selling model.

Avon also said that Silpada Co-founders Bonnie Kelly and Teresa Walsh, Chief Executive Officer and Co-founder Jerry Kelly, and the entire Silpada management team will continue to lead the company from their headquarters in Lenexa, Kansas. Jerry Kelly, Silpada's Chief Executive Officer, will report to Chuck Cramb, Avon's Vice Chairman and Chief Finance and Strategy Officer, and Silpada's financial results will be consolidated with those of Avon's North America commercial business unit. As part of the transaction, Avon will acquire the company's headquarters and warehouse facility in Lenexa.

Andrea Jung, Avon's Chairman and Chief Executive Officer, said, "We look forward to welcoming Bonnie, Teresa, Jerry and all the employees of Silpada to the Avon family upon completion of the acquisition. Over the past decade, we have watched Silpada build an enviable reputation as a fast-growing, high-quality jewelry brand and one of the most impressive party-plan direct selling organizations in the world. This new partnership is an exciting opportunity to reach new consumers and representatives with a higher-tier brand and direct sales model that complements our existing business."

Founded in 1997, privately held Silpada has annual revenues of approximately $230 million and generates operating margins that are significantly higher than Avon's. The company offers a range of approximately 450 sterling silver jewelry products at higher price points than Avon's core jewelry offerings. In addition, Silpada's direct selling model attracts representatives who engage in party-plan selling, while Avon operates with a person-to-person relationship-based model.

Avon's Mr. Cramb said, "With its solid 13-year track-record as a growing profitable business, Silpada represents an outstanding addition to our portfolio. We believe that Silpada's strong financial performance, its disciplined operations and its highly compatible culture based on empowering women make it a great fit for Avon."


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