An iconic American company. A mysterious private investment firm. An outlandish takeover offer.
All that — and more — converged in a purported buyout offer for Avon Products Inc. on Thursday morning that sent the company’s share price on a white-knuckle ride before it was discovered to be a hoax.
The episode, in cool hindsight, seems preposterous. The offer, made in a filing with the Securities and Exchange Commission, contained typos, extra spaces — even two different names of the supposed private equity firm bidding for Avon, the beauty products company that put “Ding dong, Avon calling” into the American vernacular.
But the brief flutter in the stock market quickly gave way to a more sobering question: How could this happen? The events focused attention on SEC filing procedures, and the SEC enforcement division is reviewing the legitimacy of the offer.
A spokesman for the SEC declined to comment. Avon said it never received a takeover bid from PTG and couldn’t confirm that such an entity exists.
The filing came at 10:35 a.m. Central time from something called PTG Capital Partners Ltd. PTG said it was offering to buy iconic but troubled Avon for $18.75 a share.
It was a remarkable offer — three times what Avon was trading the day before and, at about $8.2 billion, the largest leveraged buyout of the year.
If it seemed too good to be true, investors didn’t seem to care. The possibility of Avon being acquired had long been discussed. The stock shot up about 20 percent and traders — humans and otherwise — churned about $91 million worth of Avon stock in 25 minutes.
Yet questions arose quickly on Wall Street and social media sites about the bid’s veracity. No one had ever heard of PTG; it had never made a buyout bid before. Google searches were fruitless and, shades of Nigerian scam letters, the purported firm’s own release botched its name — PTG was written as TPG twice.
“I’d give it less than a 2 percent chance of being legit,” said Steven Belgot, head of event-driven research at Renaissance Macro Research in New York. “It’s just too strange.”
It grew even more curious as calls to the primary contact on the filing, general counsel Steve Kohe, went straight to voice mail. A call to the legal adviser listed on the filing, one Michael Trose of Trose & Cox, was answered by a woman who said there was no record of him or the firm.
PTG’s address in the filing was also a red flag: 125 Old Broad Street is a real building in London’s financial district, but the firm isn’t a tenant, according to a receptionist. The postcode — the British equivalent of a ZIP code — was also wrong.
The filing was also suspicious, and not only for the extra spacing between some words. In a boilerplate section describing the firm’s business, its name was written as TPG rather than PTG.
TPG Capital is real, a longtime private equity firm that manages about $67 billion in assets.
The presumed perpetrators apparently borrowed more than just TPG’s name. The phrasing in the filing was similar to wording previously put out by TPG Capital. In 2010, TPG acquired Avon Japan from the cosmetics company. Owen Blicksilver, a TPG spokesman at Owen Blicksilver Public Relations, said TPG hasn’t bid for Avon and has no connection to PTG.
That Avon would receive a takeover offer would not be surprising. The company has posted three straight years of losses and declining sales, putting pressure on the company to explore its options. Linda Bolton Weiser of B. Riley & Co. had estimated that the entire business could fetch a takeover valuation of about $6 billion.
Avon shares did end the day up 6 percent, rising 40 cents to $7.07 a share.