LG H&H buys Avon factory in China
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LG Household & Health Care announced Wednesday it is buying Avon’s Chinese factory in an effort to expand production facilities. According to LG Household, subsidiary The Face Shop will purchase the London-based cosmetics firm’s factory in Guangzhou, China, for around 79.3 billion won ($70.8 million). Avon’s 49,500-square-meter (12.25-acre) factory in Guangzhou, China is capable of producing 13,000 tons of cosmetics and hair care and body products every year. Its facilities meet cGMP (current Good Manufacturing Practice) regulations, which are enforced by the U.S. Food and Drug Administration.
LG Household will use the Guangzhou factory to manufacture LG products like The Face Shop branded goods for its Chinese and other Asian businesses while continuing to produce Avon products as well. Avon employees will remain at the factory.
The buyout deal is expected to be finalized in February after Chinese authorities approve the transaction.
The move comes less than a year after LG Household purchased Avon’s Japanese operation for around $96 million last April. Avon said it hopes the Guangzhou factory sale will help increase its operational flexibility.
“This transaction is a significant step forward in our effort to ‘Open Up Avon’ by operating more efficiently, with a leaner, more agile global infrastructure,” said Jan Zijderveld, CEO of Avon. “We know [LG Household] well and believe that they will continue to be a strong partner for Avon.”
“We are pleased to … add a state-of-the-art facility with powerful capabilities to deliver quality products for the fast-growing local market,” added Suk Cha, CEO of LG Household.
Questions & Answers
Q.Which specific LG subsidiary is responsible for purchasing the factory?
Which specific LG subsidiary is responsible for purchasing the factory?
LG Household & Health Care's subsidiary, The Face Shop, will purchase the factory. This acquisition is part of LG Household's overall strategy to expand its production facilities.
Q.What kind of products will the Guangzhou factory produce under its new ownership?
What kind of products will the Guangzhou factory produce under its new ownership?
The factory will produce LG products, including The Face Shop branded goods, for LG Household's Chinese and other Asian markets. It will also continue to manufacture Avon products.
Q.What is the factory's current annual production capacity?
What is the factory's current annual production capacity?
The factory has the capacity to produce 13,000 tons of cosmetics, hair care, and body products annually. Its facilities meet current Good Manufacturing Practice (cGMP) regulations.
Q.How will the sale of the factory benefit Avon?
How will the sale of the factory benefit Avon?
Avon hopes the sale will increase its operational flexibility, helping it operate more efficiently with a leaner, more agile global infrastructure. CEO Jan Zijderveld stated this aligns with their 'Open Up Avon' strategy.
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