Avon Products Inc., the struggling cosmetics giant, will split off its North American business as part of a $605 million deal with private-equity firm Cerberus Capital Management.

Cerberus will acquire an 80 percent interest in the North American division for $170 million, according to a statement Thursday. That business also will assume about $230 million in long-term debt from the parent company, which will contribute $100 million in cash to the new entity.

The move follows reports earlier this month that Avon was close to selling the North American business -- a deal that drew concern from some investors. A shareholder group led by Barington Capital Group urged Avon to pursue a restructuring plan instead, rather than unloading its North American division at a “fire sale” price. But when the terms of the transaction were revealed on Thursday, investors applauded the deal, sending the shares up as much as 37 percent in early trading.

As part of the Cerberus agreement, the investment firm will make a $435 million investment in the parent company. It will take the form of convertible preferred stock with a conversion price of $5 a share. That price is a 46 percent premium to to 30-day volume-weighted stock and would equate to a stake of 16.6 percent, according to the statement.

The company also suspended its quarterly dividend, saying it would reinvest that money in the business. Avon is on track for its fourth straight year of sales declines, hurt in part for a consumer shift in North America. Fewer customers there are buying products from door-to-door sales people -- Avon’s hallmark. Shedding the domestic business will make it easier for the company to grow profitably overseas, Avon Chief Executive Officer Sheri McCoy said in the statement.

“The separation of Avon North America is the best way to ensure that both businesses have an unencumbered path to profitability and growth,” she said. “This was a key principle as we considered alternatives.”

Both cosmetics companies and skincare businesses have attracted buyer interest in recent months. In July, Coty Inc. (NYSE: COTY) agreed to buy 43 of Procter & Gamble Co.'s (NYSE: PG) beauty brands for more than $12 billion. Earlier in 2015, PE firm Wasserstein & Co. LP acquired Paris Presents Inc., a cosmetics and bath accessories business. In late 2014, TPG Growth, which owns Elf Cosmetics, invested in personal care brand Beautycounter.

Over in skincare, the Estee Lauder Cos. (NYSE: EL) picked up a stake in Korean skincare business Have & Be Co., the owner of the Dr. Jart+ and Do the Right Thing brands. Unilever has also been investing heavily in skincare, with deals for Dermalogica, Kate Somerville Skincare and Murad

--Additional reporting by Allison Collins.

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