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Coty (COTY) Unveils Plans to Offload 9% Stake in Wella To KKR
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Coty Inc. (COTY - Free Report) is committed toward undertaking initiatives to accelerate sales and profit growth, deleverage balance sheet as well as simplify its capital structure. Moving on these lines, it entered into a definitive agreement to offload nearly 9% stake in Wella to KKR & Co. Inc. (KKR - Free Report) . The beauty company will redeem almost half of KKR’s remaining convertible preferred shares in Coty, in exchange for the sale.
Coty will continue to hold nearly 30.6% of Wella’s stake for an implied value of $1.38 billion. Post the conclusion of the deal, KKR will lower its stake to the equivalent of nearly 45 million worth of Coty’s Class A shares, forming about 5.2% stake. Management expects to close the transaction by second-quarter fiscal 2022.
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Through the deal, management expects to simplify Coty’s capital structure. Incidentally, the sale will result in incremental yearly dividend cash savings to the tune of almost $26 million. This in turn will result in annual cash savings of $52 million, which takes into account the KKR secondary share offering that was concluded in September. Apart from these, Coty will benefit from reduced share count post the sale. Notably, management highlighted that Wella has seen tremendous growth in value since Coty divested its partial stake in 2020. All said, Coty believes that its retained stake in Wella will continue to be a core financial asset that is expected to drive growth in the future.
Behind Coty’s Growth Story
Coty has made several strategic partnerships to enhance its brand portfolio. Recently, the company entered into a multi-channel agreement with Perfect Corp. — a well-known beauty tech solutions provider. The partnership will bring top-notch augmented reality and artificial intelligence experiences to the digital marketing toolkits of Coty’s beauty brands. Coty and Kylie Jenner unveiled their long-term alliance in January 2020. The deal is aimed at building upon Kylie’s beauty business that includes Kylie Skin and Kylie Cosmetics. It relaunched Kylie Cosmetics, formulated using clean and vegan ingredients with a revamped packaging.
Coty is focused on its long-term strategy (unveiled on April 23), which was highlighted by six priorities toward sustainable growth. These include stabilizing the Consumer Beauty make-up brands and mass fragrances; accelerating luxury fragrances and setting up Coty as a core player in prestige make-up; establishing a skincare portfolio in prestige and mass channels; strengthening e-commerce and Direct-to-Consumer (DTC) capabilities; growing presence in China via Prestige and certain Consumer Beauty brands; as well as setting up the company as an industry leader in sustainability.
Shares of this Zacks Rank #3 (Hold) company have increased 16.6% so far this year compared with the industry’s growth of 7.1%.
Nu Skin Enterprises, Inc. (NUS - Free Report) , currently carrying a Zacks Rank #2 (Buy), has a trailing four-quarter earnings surprise of 15.7%, on average.
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Coty (COTY) Unveils Plans to Offload 9% Stake in Wella To KKR
Coty Inc. (COTY - Free Report) is committed toward undertaking initiatives to accelerate sales and profit growth, deleverage balance sheet as well as simplify its capital structure. Moving on these lines, it entered into a definitive agreement to offload nearly 9% stake in Wella to KKR & Co. Inc. (KKR - Free Report) . The beauty company will redeem almost half of KKR’s remaining convertible preferred shares in Coty, in exchange for the sale.
Coty will continue to hold nearly 30.6% of Wella’s stake for an implied value of $1.38 billion. Post the conclusion of the deal, KKR will lower its stake to the equivalent of nearly 45 million worth of Coty’s Class A shares, forming about 5.2% stake. Management expects to close the transaction by second-quarter fiscal 2022.
Through the deal, management expects to simplify Coty’s capital structure. Incidentally, the sale will result in incremental yearly dividend cash savings to the tune of almost $26 million. This in turn will result in annual cash savings of $52 million, which takes into account the KKR secondary share offering that was concluded in September. Apart from these, Coty will benefit from reduced share count post the sale. Notably, management highlighted that Wella has seen tremendous growth in value since Coty divested its partial stake in 2020. All said, Coty believes that its retained stake in Wella will continue to be a core financial asset that is expected to drive growth in the future.
Behind Coty’s Growth Story
Coty has made several strategic partnerships to enhance its brand portfolio. Recently, the company entered into a multi-channel agreement with Perfect Corp. — a well-known beauty tech solutions provider. The partnership will bring top-notch augmented reality and artificial intelligence experiences to the digital marketing toolkits of Coty’s beauty brands. Coty and Kylie Jenner unveiled their long-term alliance in January 2020. The deal is aimed at building upon Kylie’s beauty business that includes Kylie Skin and Kylie Cosmetics. It relaunched Kylie Cosmetics, formulated using clean and vegan ingredients with a revamped packaging.
Coty is focused on its long-term strategy (unveiled on April 23), which was highlighted by six priorities toward sustainable growth. These include stabilizing the Consumer Beauty make-up brands and mass fragrances; accelerating luxury fragrances and setting up Coty as a core player in prestige make-up; establishing a skincare portfolio in prestige and mass channels; strengthening e-commerce and Direct-to-Consumer (DTC) capabilities; growing presence in China via Prestige and certain Consumer Beauty brands; as well as setting up the company as an industry leader in sustainability.
Shares of this Zacks Rank #3 (Hold) company have increased 16.6% so far this year compared with the industry’s growth of 7.1%.
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Helen of Troy Limited (HELE - Free Report) , currently sporting a Zacks Rank #1 (Strong Buy), has a trailing four-quarter earnings surprise of 28.2%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
Nu Skin Enterprises, Inc. (NUS - Free Report) , currently carrying a Zacks Rank #2 (Buy), has a trailing four-quarter earnings surprise of 15.7%, on average.