PARIS — Coty Inc. said Friday that it would sell approximately 9 percent of its stake in professional beauty brand Wella to KKR in exchange for almost half of the U.S. cosmetic group’s shares that the private equity firm owns, in a transaction valued at about $426.5 million.
The move decreases Coty’s share in Wella to about 30.6 percent, which is valued at approximately $1.38 billion.
That compares to the $1.26 billion book value of its 40 percent stake on June 30.
The U.S.-based maker of Cover Girl, Burberry and Gucci beauty products last December said it had closed a deal to sell a majority stake in Wella, OPI and Clairol to a joint venture that is majority-owned by KKR.
As part of the deal, Coty was taking home $2.5 billion in cash, which it would use to reduce leverage. The company planned to lower net debt from about $7.9 billion to about $5 billion by the end of the second quarter of 2021.
That move, combined with Coty’s remaining 40 percent ownership position in the joint venture, was to put “economic net debt” below $4 billion, which the company said would increase its flexibility to invest behind key brands and “navigate a dynamic operating environment.”
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In a statement released Friday, Laurent Mercier, Coty’s chief financial officer, said: “The value of Wella has increased significantly since we undertook our partial divestment in 2020, and KKR became our strategic partner in the Wella business. Today’s announcement is a testament of our initial investment strategy of capitalizing on the expected increase in Wella’s value over time to further our dual agenda of deleveraging and simplifying Coty’s capital structure, with the added benefits of improving cash flow and driving EPS accretion.”
The deal, which is expected to close in the second quarter of Coty’s fiscal 2022 year, should also contribute $52 million in cost savings per year, the group said.
Once the transaction is complete, KKR would have reduced its ownership to the equivalent of approximately 45 million Coty Class A shares, which represent a stake in Coty of around 5.2 percent.
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