18 Jul 2023 --- Coty has entered into a binding letter of intent to sell a portion of its stake in German hair care and beauty brand Wella to investment firm, IGF Wealth Management.
The cosmetics giant will sell a 3.6% stake in Wella for US$150 million, subject to the completion of due diligence, reflecting a 4% premium to the book value of Wella as of March 31, 2023.
The transaction is expected to close in the next two months subject to certain closing conditions, including the approval of Kohlberg Kravis Roberts & Co. Following this, Coty will retain a 22.3% stake in Wella with an implied valuation of approximately US$900 million.
“Today’s announcement is a milestone for Coty, as the partial monetization of our Wella stake reinforces the strength of our balance sheet, with no debt maturities in the next two years,” comments Laurent Mercier, Coty CFO.
Reinforcing “beauty powerhouse” position
The expected transaction is deemed a “concrete step” in Coty’s aim to fully divest its retained Wella stake and reach a leverage ratio of approximately 2x by end of CY25. Coty expects this transaction to advance its objectives to actively deleverage, including reaching its target of driving leverage ratio toward 3x exiting CY23.
“Coupling this deleveraging with a best-in-class medium term growth algorithm, an active capital return program, including US$400 million in targeted future share buybacks, and the continued momentum in our business, it is clear that we are reinforcing Coty’s position as a beauty powerhouse,” concludes Mercier.
The upcoming divestment follows Coty selling its 9% stake in Wella to KKR in October 2021, in a transaction valued at approximately US$426.5 million.
Coty and Wella in spotlight
In other business developments, Coty is reportedly in talks with Kim Kardashian, who may be seeking to buy back her minority stake in beauty brand SKKN by Kim, three years after it was sold to the beauty giant.
In April, Coty’s portfolio brand Gucci launched the “world’s first” globally distributed fragrance manufactured using 100% carbon-captured alcohol.
Last year, Wella Company acquired Briogeo, “one of the largest independent Black-owned brands in the US,” to speed its growth and expand its environmentally sustainable portfolio.
By Benjamin Ferrer
