Coty Inc. may be moving plans for an initial public offering to thefront burner again.
Speculation about a possible IPO by thebeauty firm whirled Tuesday in light of a cash infusion made into thecompany by two private equity firms.
Berkshire Partners, based inBoston, and Rhône, which has offices in New York, London and Paris,made minority equity investments in the $3.6 billion Coty. Each of theinvestors will be represented on its board. Details of the transactionwere not disclosed.
The investments could fuel furtheracquisitions by Coty, which in late 2010 alone acquired OPI ProductsInc., Philosophy Inc., Chinese skin care company TJoy and the Germanbeauty brand Dr. Scheller Cosmetics. The deal could also help financethe purchases Coty made last year. Industry sources estimate theacquisitions had a combined price tag of more than $2 billion. Coty isestimated to have paid roughly $1 billion each for OPI and Philosophy.
Shortlyafter the acquisitions, chief executive officer Bernd Beetz told WWD,“It is important that we broaden our footprint and build strength incolor cosmetics and skin care.”
One industry source suggestedthe private equity investments come in anticipation of the beauty firmaiming for an IPO, a move that may have been delayed by the recession,and presumes an IPO could be a year away. It has been believed that, formore than a decade, Coty’s owner, the Ludwigshafen, Germany-based Joh.A. Benckiser GmbH, a private holding company, had ambitions to take Cotypublic, despite denials. A future IPO could provide a logical exitstrategy for Rhône and Berkshire, which counts Bare Escentuals among itsformer investments.
Before it can pursue such a strategy inearnest, Coty will have to continue to round out its product portfolio.The firm has worked to decrease its dependence on fragrances, whichaccounted for 62 percent of its product portfolio for the fiscal yearended June 30. Color cosmetics made up 23 percent, with sun careaccounting for the balance of 15 percent.
Of course, thecompany’s spate of recent acquisitions have helped to pad its skin careand makeup offering. As previously reported by WWD, the acquisitionsmentioned above shrank Coty’s share of fragrance by 7 percent to 55percent, color cosmetics swelled by 3 percent to 26 percent of Cotyvolume, skin care jumped from 4 percent to 10 percent and the share oftoiletries was reduced by 2 percent to 9 percent.
But severalindustry observers suggested larger, more established skin care andmakeup brands are still needed to meaningfully unhinge Coty’s relianceon fragrance, a market that saw sales tick up a meager 1 percent in2010, according to The NPD Group.
Referring to the investments byBerkshire and Rhône, Beetz stated, “This mutually beneficial agreementallows Coty to continue its accelerated growth path organically andexternally around the globe. By bringing these partners on board, Cotywill be in a stronger position to prepare for future and largeracquisitions while maintaining the culture that makes Coty such a uniqueplace in the beauty industry.”
Bank of America Merrill Lynchrepresented Berkshire Partners, and Morgan Stanley represented Rhône inconnection to the transaction.
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