French cosmetic company L'Oreal is preparing to takeover Avon. Post this news, shares of Avon rose.

According to reports, L'Oreal is all geared to make a cash offer of more than $US44 ($NZ62.54) a share for Avon, the US cosmetics and perfume company.
In Tuesday afternoon trading, Avon shares went up 2.5 percent, at $US33.99 after soaring as high as $US36.20 earlier in the day.

However, representatives of both Avon and L'Oreal have refused to comment on this issue. But, a France-based investment banker familiar with the situation and development of this issue described the possibility of a bid for Avon as "unlikely".

Reuters has stated that an offer of $US44 a share would symbolize a premium of 32.7 percent over Avon's Monday closing price of $US33.16.

UBS analysts have commented that it is surprising that L'Oreal is scouting for takeover targets. The company is in low debts at the moment. Furthermore, the beauty industry is "ripe for the next round of consolidation."

Last month, consumer goods group Unilever Plc/NV said that it would purchase U.S. hair and skin care company Alberto Culver Co. for $3.7 billion, while Procter & Gamble Co.'s chief executive expressed interest in Nivea skin cream brand & spoke about a takeover too. The UBS note also said buying Avon would assist L'Oreal to win a substantial number of consumers in developing markets (especially Latin America)