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Coty to Sell 9% Stake in Wella to KKR in $426 Million Deal

October 08, 2021 BeautyMatter
October 08, 2021
Wella

Coty announced it would swap around 9% of its stake in Wella with KKR for some of the cosmetic maker's shares the buyout firm owns, valuing the deal at $426.5 million.

WHO: Founded in 1880 by Franz Ströher, Wella is a German haircare company headquartered in Geneva, Switzerland, specializing in the professional haircare sector. The business was controlled by Procter & Gamble from 2003 until Coty acquired the business in 2015, along with some 40 other P&G brands.

Coty is one of the world's largest beauty companies with an iconic portfolio of brands across fragrance, color cosmetics, hair color and styling, and skin and body care. Coty is the global leader in fragrance, a strong number two in professional hair color and styling, and number three in color cosmetics. Coty's products are sold in over 150 countries around the world. The professional portfolio includes Wella Professionals, System Professional, Nioxin, Sebastian Professional, Londa Professional, Sassoon Professional, Clairol Professional, Wella Color Charm, OPI, and ghd.

KKR is a leading global investment firm that manages multiple alternative asset classes, including private equity, energy, infrastructure, real estate, and credit, with strategic partners that manage hedge funds.

WHY: The deal, which is expected to close in the second quarter of Coty's fiscal 2022, will help Coty simplify its capital structure and save $52 million annually while also boosting its profits.

“Coty's partial exit from professional hair care with the spinoff of Wella to KKR last year is reaping rewards," wrote Deborah Aitken, a consumer analyst at Bloomberg Intelligence. "The deal also helps Coty to further deleverage its bloated balance sheet.”

IN THEIR OWN WORDS: Laurent Mercier, Coty's Chief Financial Officer, said in a statement, "The value of Wella has increased significantly since we undertook our partial divestment in 2020, and KKR became our strategic partner in the Wella business. Today's announcement is a testament of our initial investment strategy of capitalizing on the expected increase in Wella's value over time to further our dual agenda of deleveraging and simplifying Coty's capital structure, with the added benefits of improving cash flow and driving EPS accretion."

DETAILS:

  • Coty swapped around 9% of its stake in Wella with KKR for some of the cosmetic maker's shares the buyout firm owns, valuing the deal at $426.5 million.
  • Coty will redeem about half of KKR's outstanding convertible preferred shares and accrued dividends as payment.
  • The deal reduces Coty's stake in Wella to around 30.6%, valued at about $1.38 billion.
  • After the deal, KKR's stake in Coty will drop to about 5.2% to the equivalent of about 45 million Coty Class A shares.
  • Last year Coty entered into a strategic partnership with global investment firm KKR to sell a 60% stake in its professional beauty and retail hair businesses in a deal valued at $4.3 billion, or 12.3x 2019 EBITDA.
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