Coty has confirmed that it has agreed to sell a 9 percent stake in professional haircare brand Wella to KKR in exchange for the redemption of half of KKR’s remaining convertible preferred shares in Coty.
The deal will reduce Coty’s total shareholding in Wella to approximately 30.6 percent, which is valued at approximately 1.38 billion US dollars, explained the beauty company. The transaction it added reflects a 50 percent appreciation in Wella’s value since the closing of its 60 percent sale of Wella to KKR in December 2020.
As consideration for KKR’s purchase of shares in Wella from Coty, the beauty group will redeem approximately half of KKR’s outstanding convertible preferred shares and accrued dividends - or the equivalent of approximately 47 million shares of the company’s common stock, for approximately 9 percent of Wella held by Coty in a transaction valued at approximately 426.5 million US dollars.
Upon completion of the transaction, 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 deal, which is expected to close in the second quarter of Coty’s fiscal 2022 year, should also contribute 52 million US dollars in cost savings per year, Coty added.
Coty’s chief executive officer, Sue Y Nabi, said in a statement: “Our strategy for unlocking value expansion in Coty has remained consistent, anchored on three key objectives: accelerating our sales and profit growth, deleveraging our balance sheet, and simplifying our capital structure.
“Today’s announcement is a great step in advancing our balance sheet and capital structure objectives. With freed funds to drive growth and deleveraging, it is another milestone in transforming Coty into a beauty powerhouse.”
Laurent Mercier, Coty’s chief financial officer, added: “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 capitalising 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.
“Our remaining stake in Wella remains a key financial asset for Coty, which we expect to bring further value over time.”