Avon Products, Inc. announced the sale of its Guangzhou manufacturing operation to the TheFaceShop Co, Ltd., in a strategic step. The LG Household & Healthcare Ltd. subsidiary will acquire all shares of the operation, for net proceeds to Avon totalling $44 million.
The Guangzhou factory will continue to manufacture products for Avon's Chinese business under a manufacturing and supply agreement; the plant will also maximize capacity for its own production. The operation will retain Avon's associates at the facility.
The transaction marks part of Avon's strategy to accelerate its growth in the Asian region. It is expected to close by February 2019.
"This transaction is a significant step forward in our efforts to 'Open Up Avon' by operating more efficiently, with a leaner, more agile global infrastructure. This agreement provides us with greater operational and financial flexibility, while allowing us to benefit from the local knowledge, world-class products, R&D expertise and infrastructure of internationally-recognized partners such as LG H&H. By operating with a local structure that fits our purpose, we will be better positioned to capture the significant opportunity in China and the wider Asian market. We know LG H&H well and believe that they will continue to be a strong partner for Avon as we collectively seek to grow our business in the region," said Jan Zijderveld, CEO, Avon, in a press release.
Suk Cha, CEO, LG Household & Health Care, commented, "We are pleased to have reached this agreement with Avon and add a state-of-the-art facility with powerful capabilities to deliver quality products for the fast-growth local market. Our past interactions with Avon provide us a sound understanding of its brand power and global reach, and we look forward to continuing our relationship with Avon as we both explore ways to grow our product lines, bring desirable products to market faster, and each accelerate our growth across Asia."