As Coty Heads for IPO, Bernd Beetz Steps Away

On Tuesday the company also filed an update of its plan in preparation to go ahead with its $700 million initial public offering.

Coty Inc. has a new board member as it prepares to go public as former chief executive officer Bernd Beetz is exiting the firm.

This story first appeared in the May 15, 2013 issue of WWD.  Subscribe Today.

The beauty firm said that Olivier Goudet has joined the board, succeeding Beetz, who stepped down to pursue other interests. Goudet is partner and ceo of Joh. A. Benckiser Group. JAB is Coty’s majority shareholder.

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Bart Becht, chairman of Coty’s board, said, “We bid Bernd a fond farewell and wish him the best of luck in his new endeavors….We are [pleased] to add Olivier’s enormous talents and expertise to our board, and look forward to drawing on his wealth of knowledge and business experience, particularly with publicly traded consumer companies.”

Beetz, who propelled Coty’s growth with a string of celebrity fragrance launches and acquisitions, stepped down as ceo last July, less than a month after the company filed its original intention to seek an initial public offering. He remained on the firm’s board as a non-executive director. He was succeeded as ceo by Michele Scannavini on Aug. 1.

Coty on Tuesday also filed an update of its plan for an IPO.

The S-1/A registered with the Securities and Exchange Commission updates the original shelf registration filed last June, and represents the fifth amendment the company has filed in preparation to go ahead with its planned $700 million IPO. The filing did not give any time frame for the IPO, but it is expected to be within the next six weeks depending on market conditions.

In the filing, the company said it has completed a number of acquisitions to drive segment, geographic and distribution platform growth since 2002. Coty noted its acquisitions of the Marc Jacobs fragrance license and the Calvin Klein fragrance business, which it built into power brands. The beauty firm also cited the ownership of the Sally Hansen brand as an example of its expansion into the color cosmetics segment. OPI established Coty’s presence in the professional nail care sector, while the Philosophy acquisition increased Coty’s presence in skin and body care, as well as allowed it to enter new channels of distribution such as QVC and e-commerce.

“We have selectively acquired businesses that bring us new platforms, such as Tjoy, which provided us with a broad manufacturing and distribution platform for our existing portfolio of brands in China,” Coty said in the filing.

It noted four acquisitions in 2011. Two were in skin and body care: Tjoy at $346.2 million and Philosophy at $929.7 million. The other two were in color cosmetics: Dr. Scheller for $53.9 million and OPI at $948.8 million.

As investors and Wall Street analysts consider whether the planned stock offering will be a good investment, one factor will be how Coty plans to grow its business.

According to the latest filing, the company said, “While acquisitions are not essential to achieve our growth objectives, we will continue to evaluate targets that fit our strategy and add stockholder value. Our approach to acquisitions has resulted in a successful track record of identifying targets aligned with our strategic objectives, executing acquisitions quickly and efficiently and integrating the businesses successfully to both accelerate top-line growth and improve the financial performance of the overall business.”

Coty said, “We will continue to evaluate and anticipate engaging in additional selected acquisitions that would complement our current product offerings, expand our distribution channels, increase the size and geographic scope of our operations or otherwise offer operating efficiency opportunities and growth potential.”

In Tuesday’s filing, the company said it posted a net loss of $324 million on net revenues of $4.6 billion in fiscal 2012. On an adjusted basis, the beauty firm posted $301 million in net income. The company’s fiscal year ends on June 30. Coty said it generated 77 percent of net revenues in developed markets and 23 percent in emerging markets.

For the nine months ended March 31, net income was $230.3 million, compared with $32.9 million in the comparable year-ago quarter. Net revenues were essentially flat at $3.59 billion compared with figures from a year ago on a rounded basis.

The company said JAB Holdings II B.V. will continue as controlling shareholder even after the public offering of shares is completed. Donata Holding SE and Parentes Holding SE indirectly share voting and investment control over the shares held by JAB.

JAB, which will not hold any Class A common stock, will hold Class B common stock. Class B common stock will have 10 votes a share, while Class A common stock, which the selling stockholders are offering, will have one vote a share. As a result, JAB has control over decisions requiring stockholder approval, whether the election of directors, significant corporate transactions such as a merger, subject to obligations under a stockholders agreement with other major holders: affiliates of Berkshire Partners and Rhône Capital. Both are private equity firms that each made minority investments in Coty back in 2011.

The updated filing also said that the company intends to pay an annual cash dividend of 15 cents a share of its Class A common stock, as well as Class B common stock, in the second quarter of each fiscal year.

Coty operates in three key beauty segments: fragrances, color cosmetics and skin and body care, with each segment generating 53 percent, 31 percent and 16 percent of net revenues, respectively.

Its power brands across the three segments have grown to 10 in 2012 from three in 2002, with net revenue contribution rising to 70 percent of $4.6 billion in fiscal 2012 from 40 percent of $1.4 billion in fiscal 2002.

In fragrances, Coty said it occupies the number-two global position across three categories. The designer group includes Calvin Klein, Marc Jacobs, Chloé, Roberto Cavalli, Balenciaga, Bottega Veneta and Guess. The lifestyle component includes Playboy and Davidoff. The celebrity lines include Jennifer Lopez and Beyoncé Knowles.

In color cosmetics, Coty said it is ranked number six globally, with a number-two ranking in Europe and placing number five in the U.S.

The company said it has a “strong regional presence” in skin and body care.

In the filing, the company said as of June 30, 2012, it had 48 license agreements, which accounted for 60 percent of its net revenues for fiscal 2012. The top six licensed brands accounted for 41 percent of the firm’s net revenues.