Coty $1bn IPO set for this Thursday, experts expect it to be a hit
According to financial experts that watch this segment of the stock market, demand should be keen for the flotation, as investors are eager to invest in big multi-nationals with proven business track records.
Although Coty has been growing revenues in double-digit figures in recent years, in the past few quarters Coty’s financial results have softened, mainly on account of its lack of exposure to emerging markets, particularly in the Asia Pacific region, fuelling speculation that the business needs to make major acquisition to ensure future growth.
Big on fragrance, room for further investment in skin care
The company is largely known for its fragrance portfolio, and is currently ranked as the second largest fragrance player in the world, with brands such as adidas, Calvin Klein and Playboy.
It has been expanding into the skin care segment in recent years, but it is in the emerging markets, where skin care sales have been fast expanding that its portfolio is most lacking.
In the skin care market it has a considerable exposure to the mass market, but in contrast its fragrance portfolio is more focused on the prestige market.
Investment likely to focus on emerging markets
Its portfolio structure gives experts good reason to believe that the IPO may add to an already considerable war chest which could be used to invest in a business with considerable exposure in the emerging markets, and particularly in the premium skin care segment.
The company is offering up to 65.7 million Class A shares priced at between $16.50 and $18.50 on the New York Stock Exchange, offered by its biggest stockholders – JAB Holdings, and private equity firms Berkshire Partners and Rhone Capital.
JAB holdings is a consortium of four siblings from the Austria-based Reimann family. They currently have an estimated 82 percent share in the business, but the IPO will see that stake reduced by about 14 percent.
Avon unlikely to be considered again
Last year the company made a failed hostile bid to acquire Avon Products. In May 2012 the company made a bid of $10.7bn for the business, which was flatly rejected by Avon executives who at the time said the business was not for sale.
Despite the deal falling through, Coty shareholders said that they would be happy to continue the search for other suitable acquisitions, with Berkshire Hathaway stating in an investor note that it would be willing to back a similar deal in the future, although it is doubtful it will pursue Avon again.