PARIS – Coty Inc. continues deleveraging and divesting non-core assets, and has sold its remaining 25.8 percent stake in hair care giant Wella to KKR.
Under terms of the deal, Coty is to receive an upfront cash consideration of $750 million and 45 percent of any proceeds or from a further sale of or an initial public offering of the activity once KKR’s preferred return has been met.
The upfront cash proceeds from the transaction, net of tax, will be used to pay down Coty’s short- and long-term debt.
Coty said in a statement released early Friday morning that it sees strong potential for additional cash proceeds, to bring the total proceeds nearer to the carrying value of its investment in Wella.
The transaction is part of Coty’s program begun five years ago to simplify its portfolio and operations. Wella proceeds and Coty’s free cash flow generation, which was more than $350 million in the first half of its fiscal year 2025-2026, is expected to lower the group’s net leverage to about three times by the end of the 2025 calendar year.
Wella Ultimate Smooth
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The transaction comes as Coty carries out a strategic review of its mass color cosmetics business, as well as its operations in Brazil, as announced in September. That will focus on Coty’s $1.2 billion revenue mass color cosmetics business, including brands such as CoverGirl, Rimmel, Sally Hansen and Max Factor, and its $400 million revenue Brazil business, composed of local brands.
“This transaction marks a pivotal milestone for Coty – both in our transformation and our long-running deleveraging commitment,” said Laurent Mercier, Coty’s chief financial officer, regarding Wella, in the statement.
“Our strategic partnership with KKR has proven highly value-accretive,” he continued. “We have benefited from Wella’s strong growth by progressively monetizing our stake, allowing us to strengthen Coty’s financial foundations year-after-year. Completing this transaction exactly in line with our original target to fully divest Wella by the end of CY25 underscores our focus on delivering on our financial commitments and crystallizing value from non-core assets, all while sharpening our strategic focus.”
In July 2023, Coty announced it had agreed to sell a 3.6 percent stake in Wella, equivalent to $150 million, to investment firm IGF Wealth Management with the cash proceeds to be used to pay down debt.
Coty reiterated at the time a commitment to divesting its remaining 22.3 percent stake in Wella by 2025.
Coty sold its professional division, including Wella, OPI and Clairol, to KKR on Nov. 30, 2020. The $2.5 billion transaction gave the private equity firm 60 percent control over a joint venture. Coty then owned the other 40 percent, which at the time was valued at $1.3 billion.
The sale of the professional division was part of Coty’s plan to focus on its other business segments.
Then in October 2021, Coty said it was selling about 9 percent of its stake in Wella to KKR in exchange for almost half of the U.S. cosmetics group’s share that the private equity firm owned in a transaction valued at approximately $426.5 million.
The move decreased Coty’s share in Wella to about 30.6 percent, which was then valued at approximately $1.38 billion.
Meanwhile, speculation continues to mount about other whether Coty chief executive officer Sue Nabi will soon be exiting the company, as WWD reported on Dec. 15. At the time, a Coty spokeswoman declined to comment.
It is a trying time for Coty, which is set to lose its jewel-in-the-crown Gucci fragrance and beauty license when it expires in 2028. According to Evercore IRI, that brand accounts for about 8 percent of Coty’s sales and approximately 11 percent of its profits.
L’Oréal will become the license owner as part of the deal between the group and Kering, Gucci’s parent, as announced in October.
Coty stock over the past year has declined 53.6 percent.
Conjecture also continues to swirl about the remainder of Coty’s luxury business, which includes fragrance licenses for Burberry, Jil Sander and Hugo Boss.
On June 16, WWD published an article saying Coty was in early stages of discussions to sell off its business in parts, citing industry sources, who also speculated on the longevity of Nabi as group CEO. A Coty spokeswoman had no comment on the speculation at that time.
