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A screen displays the price for Avon Products Inc. at the post that trades the stock on the floor of the New York Stock Exchange, May 15, 2012. Shares of Avon Products Inc fell 15 percent in premarket trading on Tuesday, after Coty Inc withdrew its $10.7 billion takeover bid for the world's largest cosmetics direct seller, saying Avon had missed its deadline to begin discussions. (BRENDAN MCDERMID/REUTERS)
A screen displays the price for Avon Products Inc. at the post that trades the stock on the floor of the New York Stock Exchange, May 15, 2012. Shares of Avon Products Inc fell 15 percent in premarket trading on Tuesday, after Coty Inc withdrew its $10.7 billion takeover bid for the world's largest cosmetics direct seller, saying Avon had missed its deadline to begin discussions. (BRENDAN MCDERMID/REUTERS)

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Cosmetic changes at Avon are too little, too late Add to ...

Avon shareholders have mascara running down their cheeks – and they have the cosmetic company’s board of directors to blame. Having spent years enabling failed former CEO Andrea Jung, the hapless Avon board has compounded its errors with its wishy-washy response to a compelling $10.7-billion (U.S.) merger offer by Coty , the European fragrance maker.

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Though Avon shareholders were skeptical a deal would be consummated from the start, they still took the stumble badly. The stock slid 11 per cent to around $18, or roughly $1 below where it traded before Coty came courting more than a month ago. Investors are rightly upset. The board had little to lose in entertaining the offer.

True, Coty may have played its hand opportunely, what with Avon’s financials messy, its management team brand new and its strategy in transition. It sweetened its offer last week and added Warren Buffett’s deep-pocketed Berkshire Hathaway Inc. to its financing roster. That made the offer a viable alternative to Avon muddling through yet another restructuring on its own. Unfortunately, the board still waffled.

Of course, poor judgment is par for the course at Avon. It kept Ms. Jung in charge for five years, during which time the stock halved – shedding $8-billion of market cap. It even kept her on as chairman after stripping her of the CEO title despite an investigation by the Securities and Exchange Commission into the company’s international operations as well as its dealings with financial analysts.

It’s understandable that the board would want to give new boss Sheri McCoy a shot. The former Johnson & Johnson executive joined less than a month ago. But Avon investors have endured many failed promises in the past. While Ms. McCoy might be the right person to turn around Avon’s door-to-door sales model, it’s too little, too late.

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