Natura & Co. is considering separating its Natura business from Avon.
In a Monday announcement, Natura said its board of directors has authorized exploration of the separation. If it is approved, the move would create two independent, publicly traded beauty companies.
Under the proposal, Natura would operate its namesake brand globally, and would continue to run Avon’s brand in Latin America. Avon would run the rest of its operations outside of Latin America and would indirectly benefit from sales in Latin America through a commercial arrangement with Natura. A deal is not guaranteed and completion of the separation would be subject to board approval and majority shareholder consent, the company said.
“The aim of this study is to unlock the full potential of both companies, which have distinct geographical footprints and serve different beauty consultants and consumers,” Natura said in its announcement. “The two standalone entities would each have independent governance and management teams. This potential separation would also afford shareholders greater visibility into the financial performance, structure, growth prospects, and investment theses of the respective companies.”
If this separation moves forward, it would be the third change to Natura’s corporate structure in the last year. In November, Natura & Co. announced it had sold The Body Shop to private equity firm Aurelius for 207 million pounds (about $257 million at that time). Natura & Co. acquired the brand from L’Oréal in 2017. And in April, Natura sold luxury beauty brand Aesop to L’Oréal for $2.5 billion.
“The proceeds from the sale of Aesop, closed in late August, enabled us to quickly advance in our liability management plan, with more than half of our debt already prepaid by the end of the quarter,” Fábio Barbosa, group CEO of Natura & Co., said in the company’s last earnings announcement in November. “This is an important step to unlock sustainable value for our investors and deliver on our financial priorities of maintaining a strong capital structure, strict financial discipline on costs and expenses, and boosting cash conversion.”
In the third quarter, Sao Paulo-based Natura & Co. reported consolidated net revenue of 7.5 billion Brazilian reals (about $1.5 billion at press time). That was down 10.5% from a year ago. Revenue at Avon International fell 11.6% in the quarter and The Body Shop reported a 15% decline. Natura & Co. has 900 stores and franchises and 22,000 employees.