Coty delays plan for $700m share flotation

By Simon Pitman

- Last updated on GMT

Related tags: Economics

Coty has delayed plans to go on a spending spree on the back of a $700m initial public offering, with uncertainties in the global economy cited as the reason, reports say.

The company has decided to hold back on its decision to raise funds through a share flotation that would have enabled to go on one of the biggest buying sprees in the industry for many years , a source close to the deal told the Financial Times.

The decision follows in the footsteps of many larger companies who have held off on merger and acquisition plans in recent months, preferring to ride out the current financial uncertainty before making any big business transactions.

A troubled global economy is putting M&A activity on hold

Currently the US economy is suffering from stunted growth, while the European economy is still facing up to a massive debt crisis that has left the Euro Zone teetering on the edge of a second recession, following on from that of 2009.

The resulting slowdown in the US and European economies has in turn affected demand for manufactured exported products from many of the world’s developing markets, especially China, where economic growth has fallen from double digit figures last year to a current figure of around 7 percent.

Coty announced the flotation back in July of this year, which followed on from its high profile offer for a controlling stake in Avon. Executives at the direct sales business did not respond to the bid attempt within the prescribed time-frame and Coty eventually withdrew its offer.

Coty is well positioned to capitalise on high market growth

The business, which has grown enormously in recent years on the back of carefully chosen licensing deals with high profile celebrities and designers, such as Beyonce Knowles, Halle Berry, David Beckham and Lady Gaga, as well as designers labels such as Vivienne.

But building on the licensing side of the business it has also been diversifying by growing its skin care and color cosmetics portfolio, buying up the Philosophy skin care brand from Carlyle and nail care providing OPI, both in 2010.

Coty is a France-based global company, but is majority owned by the German Benckiser family, a multi billion dollar investment business that also owns the British-based Reckitt-Benckiser personal and home care business, an empire that gives it significant financial backing and impetus, as well as some synergies

Related topics: Business & Financial

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