Avon Products said on Thursday it had agreed to sell 80.1 percent of its North America business to private equity firm Cerberus Capital Management for $170 million.
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New York-based Cerberus will also invest $435 million for a 16.6 percent stake in the direct-seller of cosmetics in a deal that values Avon at about $2.5 billion.
Avon North America, which accounts for about 14 percent of Avon's total revenue, will be separated from the parent company.
Avon, whose shares were up 15 percent in premarket trading, will appoint three Cerberus members to its board.
The Wall Street Journal first reported that Cerberus was close to buying most of Avon's North America business.
Avon also said it would suspend its quarterly dividend to reinvest in its business.
The deal comes after activist investor Barington Capital proposed a restructuring of Avon but had warned against the sale of its North American arm to Cerberus.
Avon, which started off selling perfumes door-to-door in 1886, has in the past fended off takeover offers.
In 2012, fragrance maker Coty withdrew a $10.7 billion offer to buy Avon after the company missed a deadline to discuss a deal.
Since then, Avon's market value has fallen to $1.78 billion as of Wednesday's close, as it struggles to reverse a near four-year decline in sales, mainly due to weak demand in Brazil.
(Reporting By Aurindom Mukherjee and Yashaswini Swamynathan in Bengaluru; Editing by Anupama Dwivedi and Ted Kerr)