Private Equity: Coty Sells Majority Stake of Hair Business to KKR

June 1, 2020 | News, Private Equity
https://dailyalts.com/wp-content/uploads/2019/09/57e0d3404e56ae14ea898579ce203e7c1d22dfe05556744a722a7ed1_640.jpg

Beauty products firm Coty (NASDAQ: COTY) and KKR (NYSE: KKR) have entered into a strategic transaction for Coty’s Professional and Retail Hair business. The transaction includes the Wella, Clairol, OPI and Good Hair Day brands. The deal values the businesses at $4.3 billion on a cash- and debt-free basis.

KKR will own 60% of this separately managed entity. Coty will own the remaining 40%. KKR is investing $1 billion directly into the firm through the issuance of convertible preferred shares.

Inside the Coty Deal

The transaction allows Coty management to focus on Prestige and Mass Beauty and develop increased cost competitiveness. By retaining a 40% stake in Wella, Coty’s shareholders can still benefit from the growth opportunities for Wella’s business and its long-term value creation. Coty will also be able to will reinvest in its power brands. These include Sally Hansen, Rimmel, CoverGirl, and Max Factor.

The company is targeting a net reduction in fixed costs of approximately $600 million in cash over the next 3 years. This equates to 25% of its pro forma fixed cost base. The one-off costs associated with this program come in around $500 million. These measures will drive strong financial improvement at Coty through FY23. The company expects adjusted operating margins in the mid-teens and leverage of below 4x.

KKR’s majority investment in Wella values the business at $4.3 billion on a cash- and debt-free basis. This equates to 12.3x FY19 adjusted EBITDA of $350 million on a fully-allocated basis. The deal includes approximately $160 million of central costs which will not transfer as part of the transaction.

The deal should close in the next six to nine months. The Wella business will likely issue approximately $1 billion of debt and distribute the proceeds to its respective shareholders. This will result in total net cash proceeds to Coty of approximately $2.5 billion.

Recent: DailyAlts Playbook: America on Fire, Goldman Shorts the Dollar, a $41 Trillion Hole, and the Death of Pensions

Free Industry News

Subscribe to our free newsletter for updates and news about alternatives investments.

  • This field is for validation purposes and should be left unchanged.


Shape

Latest Alternative Investment News

https://dailyalts.com/wp-content/uploads/2021/07/bitcoin-2668211_640.jpg
Digital Assets: Bitcoin Closes In On $40K After Amazon Rumors Spark Rally
July 26, 2021     Digital Assets, News

Bitcoin, the leading cryptocurrency, which had been in a downtrend since its April highs, and tested $30,000 on more than one occasion, surged nearly 15% after a rumor that Amazon…

https://dailyalts.com/wp-content/uploads/2021/07/rivian-r1t-7.jpg
Venture Capital: Rivian Lands $2.5B; Plans Second EV Plant Including For Batteries
July 26, 2021     Latest News, News, Venture Capital

Electric vehicle maker Rivian announced Friday (July 23, 2021) its close of a $2.5 billion funding round led by Amazon’s (NASDAQ: AMZN) Climate Pledge Fund, D1 Capital Partners, Ford Motor…

https://dailyalts.com/wp-content/uploads/2021/07/champagne-2178775_640.jpg
Liquid Alternatives: Three Reasons
July 26, 2021     Liquid Alternatives, News

Spawned after the 2008 financial crisis, liquid alternatives have disappointed investors. During the 2010s, these instruments averaged an annualized gain of 1.66%. Writing in Morningstar, columnist John Rekenthaler makes a…

https://dailyalts.com/wp-content/uploads/2021/07/Ez4eEsTWUAMC8Gz.jpg
FinTech: UK-Based PensionBee Reports Assets Under Administration Have Doubled In A Year
July 26, 2021     FinTech, News

An influx of new customers has boosted two-fold PensionBee’s assets under administration as at June 30, 2021. Further, in a landmark year, PensionBee (LON: PBEE) raised £55 million from an…