Avon's mystery caller ramps shares

Shares in Avon Products the world's largest door-to-door cosmetics group, surged almost 20 per cent on Thursday and then fell back after a purported $8.2bn bid from an unknown private equity firm proved to be a hoax.

In a superficially plausible-sounding SEC filing, replete with the usual corporate jargon, "PTG Capital Partners" said it would pay $18.75 a share for Avon - roughly three times the price at which it was trading on Thursday morning.

Some 50m shares in the company - famous for its 1954 "Avon calling" advertising campaign - changed hands at up to $8 a share and trading was briefly halted before falling back as doubts grew about the veracity of the filing. By early afternoon the shares were still up 5.5 per cent at $7.03.

PTG's filing directed enquiries to its offices in the Stock Exchange Tower in London or to its general counsel, Steve Kohe. A call to Mr Kohe went to voicemail: "You have reached PTG Capital Partners. Please leave a message."

Avon, which has suffered three straight years of losses and declining sales, said an hour and a half later that PTG's filing appeared to be a hoax: "Avon reports that it has not received any offer or other communication from such an entity and has not been able to confirm that such an entity exists."

Whoever went to the trouble to fake the filing and set up a voicemail box for Mr Kohe was not as painstaking in the proofreading. "PTG" twice referred to itself as "TPG" and language in the document appeared to have been lifted from earlier releases from the real private equity firm of that name.

The New York Stock Exchange and the SEC declined to comment.

Avon has been hit by lower sales in emerging markets and allegations of bribery in China. The company reported a $147m loss on sales of $1.8bn in the first quarter. Last month it was reported that Avon was exploring the sale of its North American business as part of a strategic overhaul. Avon derived just 13.6 per cent of its overall sales from region last year.

"Based on our fundamental work, it is hard to see how a buyer could value (Avon) at $18.75," wrote Nik Modi, analyst at RBC, in a note.

If the PTG "bid" was a scam to allow a trader to profit from the ensuing run-up in the share price, it will be the latest in a long line of such hoaxes, raising questions about how such a filing could get through.

In 1989, stocks in Pan Am and NWA, parent of Northwest Airlines, were halted after Reuters reported on a fake takeover bid for both companies. Last year the SEC alleged that a man who profited from selling stock in Allied Nevada Gold after making a fake $750m bid for the company had fled to China.

Additional reporting by Tom Braithwaite and Kara Scannell in New York and Barney Jopson and Gina Chon in Washington

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