Coty sells majority stake in Wella, Clairol, OPI and ghd brands to KKR
Monday Coty announced having come to an agreement with the New York – based global investment firm KKR. The two entities have signed a memorandum of understanding (MOU) and when it’s all said and done, Coty will still own 40% of the pro beauty and retail hair brands as well as bring in $3.3 billion in proceeds.
And while Coty announced its intention to also divest its Brazil business back in October, for now “Coty’s mass beauty business in Brazil will remain a fully owned business of Coty,” states this week’s media release.
“Today’s announcement with KKR provides an increased sense of energy and excitement for all of us at Coty,” says Coty COO and CFO Pierre-André Terisse.
“As part of a number of steps to continue Coty’s transformation, the strategic partnership with KKR is clearly the most game-changing,” he says, adding that, “We will see immediate improvement to our balance sheet and are in the final stages of finalizing a 60/40 partnership for our Professional Beauty and Retail Hair businesses.”
Before the deal closes, Coty is making the brands into a single stand-alone company
“In this year when Wella Professional is turning 140 years old, I am proud and inspired at the prospect of Wella operating again as a standalone company,” says Sylvie Moreau, President of Coty Professional Beauty in a post she made to LinkedIn on Monday.
“Partnering with KKR, one of the world’s most respected and preeminent investment firms,” she writes, “will propel our people and our brands into a bright and successful new future. This is a great outcome for our teams around the world who I would like to warmly thank for their resilience, especially in the midst of this pandemic.”
Before the deal closes (following confirmatory due diligence and the execution of definitive documentation), Wella, Clairol, OPI and ghd are being collected together as a standalone company. And it’s that company, known going forward as Wella, that KKR is acquiring 60% of.
KKR sees an opportunity for growth in the professional hair category
“We are excited to form this partnership to invest in Coty to support it through this period of unprecedented global uncertainty and allow it to emerge as a stronger, more agile business, and to acquire a majority stake in Wella, a market leader with a strong portfolio of brands in the attractive professional hair market where we see significant opportunities to accelerate growth in partnership with its experienced leadership team,” says Johannes Huth, Partner and Head of KKR EMEA.
For Coty, the deal comes at a time that makes it significant not just in terms of refocusing its beauty business on select categories—fragrance, cosmetics, and skin care—but also because of the need to move through the Coronavirus health and financial crisis.
“In the shadow of a global lockdown,” explains Terisse, “we have also announced a comprehensive plan to reduce fixed costs by $700 million, which allows us to confirm our target to reach mid teens operating margins by FY23. Overall, this alliance and the steps we are taking to strengthen our businesses will be key elements of our transformation.”
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She writes daily news about the business of beauty in the Americas region and regularly produces video interviews with cosmetics, fragrance, personal care, and packaging experts as well as with indie brand founders. Deanna Utroske was recently featured on Publishing Executive.
