Natura Offloads Avon International: A Strategic Shift Unfolds

Natura &Co (NTCO3) confirms exclusive talks with IG4 to sell Avon’s operations outside Latin America, according to a February 20, 2025, CVM filing.

The Brazilian cosmetics giant aims to shed a struggling division, with CFO Guilherme Castellan noting no significant synergies exist between Avon LATAM and its international arm.

Negotiations remain early, but Natura explores alternatives like partnerships or a spinoff. The story traces back to 2019 when Natura acquires Avon Products for $2 billion via stock swap, targeting global expansion.

The move creates the world’s fourth-largest cosmetics firm, yet financial strain emerges fast. Avon International’s $1.3 billion debt leads to a U.S. Chapter 11 filing in August 2023, while Natura reports a R$7 billion net loss in Q3 2024, including a R$5.8 billion write-off.

IG4, a Brazilian private equity firm, specializes in turning around distressed companies in emerging markets. Analysts peg Avon International’s potential sale price at R$1.5 billion to R$2 billion, offering Natura relief from its debt burden.

Meanwhile, Avon International’s revenue drops 8% to R$2.1 billion in 2023, with a slim 3% EBITDA margin. Natura’s stock rises 3.2% to R$15.27 on the news, reflecting market hope for a leaner operation.

The company already offloads The Body Shop in 2023 for R$1.2 billion, cutting its debt-to-EBITDA ratio from 3.5x to 2.8x. However, Avon LATAM thrives, posting 5% revenue growth in Brazil and Mexico.

The deal’s stakes loom large for both sides. Natura seeks to refocus on Latin America, where it holds a 15% market share, while IG4 bets on reviving Avon’s faded brand. Transitioning from direct sales to online platforms could define IG4’s strategy if the sale proceeds.

Challenges persist, as failed talks might force Natura into deeper losses or a cheaper deal. With Q2 2024 showing a R$858.9 million net loss, up 17.4% from last year, pressure mounts.

Still, the narrative underscores a pragmatic pivot—Natura trims fat to survive, while IG4 hunts value in distress. This unfolding saga grips business watchers, spotlighting how legacy firms adapt—or falter—in a shifting global market.

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