Avon Calling

Just before last Christmas, a racing-car driver entered the museum-like sanctum of Tiffany & Co. in Manhattan to buy a diamond ring for himself. A clerk told him that such a purchase would be "vulgar" for a man. The driver argued: "I'm a customer, and your job is to give me what I want." Sniffed the clerk: "What you want is your business. What we sell is our business."

So it has been with Tiffany, the snob queen of Fifth Avenue and points south and west (it also has stores in Atlanta, Chicago, Houston, Beverly Hills and San Francisco). Last week Tiffany surprised almost everybody by agreeing to sell its whole business--lock, stock and bauble. The buyer will be Avon Products, Inc., the door-to-door giant that knows a lot more about cold cream than carats. Selling to such a mass-not-class company would seem to betray a rare streak of egalitarianism in Tiffany Chairman Walter Hoving, whose often stated political views would make Marie Antoinette's sound like Vanessa Redgrave's. In fact, money talked. In a lopsided swap, Avon offered $45 worth of its stock for each share of Tiffany, which had been hovering at $19 over the counter. Hoving owns 18% of the Tiffany shares, and overnight their value shot from $7.5 million to $18 million.

Avon apparently was willing to pay such a high premium, as buyers often do at Tiffany, to clinch the deal quickly in order to avoid a bidding war with other covetous companies. Hoving, 80, long courted by many other suitors, was willing to sell to Avon not only because the price was ripe--$104 million in all--but also because he was promised that he could continue to run Tiffany as an independent fiefdom. Says Hoving: "Charles Tiffany, who founded the company, ran it until he was 92, so I'm going to try to beat his record and run it until I'm 93, God willing."

Tiffany sales, which hit $60 million last year, are up a further 27% this year, and much bigger Avon, with a near million-member sales force, has been growing almost as rapidly. In part because more women are working, and they have both the need and the cash to buy plenty of cosmetics, sales this year are running 23% over last year's record $1.6 billion. Costume jewelry has become Avon's fastest-growing line, from nothing in 1970 to $260 million last year. Avon does not intend to abuse the Tiffany name in flogging its own cheaper wares. Says John Riedy, an analyst at Drexel, Burnham, Lambert: "That would be like putting a Rolls Royce label on a Pinto." Instead, the company plans next year to test-market a whole new line: door-to-door vitamins.

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