KKR Makes $750 Million Beauty Bet on Coty

The investment is the first step toward a broader deal under which KKR would acquire 60% of Coty's professional beauty and hair care business.
Matthew HellerMay 12, 2020
KKR Makes $750 Million Beauty Bet on Coty

Private-equity giant KKR is making a bet on cosmetics maker Coty that could ultimately total $4 billion and give it a majority stake in such hair care brands as Wella and Clairol.

As part of a deal announced on Monday, Coty will sell preferred stock to KKR for $750 million, giving it a cash infusion as it attempts to weather the retail storms caused by the coronavirus pandemic.

The two companies have also signed a memorandum of understanding under which Coty’s professional beauty and retail hair businesses, including the Wella and Clairol brands, would be spun off, with KKR owning a 60% stake and Coty receiving additional cash proceeds of about $3 billion.

KKR’s investment “will be instrumental to strengthening Coty’s balance sheet and helping the company to achieve long-term growth in shareholder value,” Coty Chairman Peter Harf said in a news release.

As The Financial Times reports, the plan is the latest in a string of moves by Coty “to turn around the company, whose biggest brands such as CoverGirl have lost favor with consumers who are flocking to new, often celebrity-driven rivals.”

Coty, which acquired Wella, Clairol and dozens of other beauty brands from Procter & Gamble for $12 billion in 2016, wrote down about $3 billion in the value of the brands last year. It announced in October 2019 that it was looking to sell its beauty and haircare division, hoping to raise about $8 billion.

“Unilever and Henkel, as well as private equity firms, were weighing bids just as the COVID-19 pandemic hit, shutting down hair and beauty salons and upending equity and debt markets,” the FT said.

KKR has a history of investing in branded consumer businesses, including the beauty sector, and reportedly made an offer for Coty’s professional beauty brands when they were owned by P&G. It will invest another $250 million in Coty when the spinoff deal is signed.

“Coty is a leader in the attractive global beauty market with iconic brands, global presence and scale, and a strong track record of innovation and growth,” Johannes Huth, head of KKR EMEA, said.

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