Coty to sell partial stake in Wella to KKR

By

Jennifer Braun

Published
Oct 4, 2021

Coty Inc announced on Friday a definitive agreement to sell an approximate 9 percent stake in its hair care brand Wella to KKR in exchange for some of the cosmetic maker's shares the U.S. buyout firm owns, valuing the deal at $426.5 million.

As part of the deal, Coty will reduce its total shareholding in the professional beauty company to approximately 30.6 percent. Likewise, KKR will reduce its ownership to the equivalent of about 45 million Coty Class A shares, representing an approximate 5.2 percent stake in Coty.

The value of the deal reflects a 50 percent appreciation in Wella’s value since the closing of Coty’s 60 percent sale of Wella to KKR in December 2020, coinciding with the reopening of global hair salons and the positive momentum in the Wella business.

The transaction is also expected to simplify Coty’s capital structure and result in an additional approximately $26 million in annual dividend cash savings, totaling $52 million in annual cash savings when combined with the KKR secondary share offering that closed in September. 

“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 our cash flow and driving EPS accretion,” said Laurent Mercier, Coty’s chief financial officer.

“Our remaining stake in Wella remains a key financial asset for Coty, which we expect to bring further value over time.”

Johannes Huth, KKR partner and head of KKR’s EMEA operations, added: “The agreement we have reached with Coty enables each party to recognize the significant value and growth created in each of the two businesses over the past year, while allowing KKR to increase its interest in Wella, which is our focus. We continue to see meaningful opportunities to accelerate growth at both Wella and Coty and look forward to our enduring collaboration.”

The transaction is expected to close in the second quarter of Coty’s FY22.