Coty, a beauty, personal care and cosmetics company, is turning its Wella division into an independent company as part of a $ 4.3 billion investment deal with global equity firm KKR.
The brands Wella, Clairol, OPI and ghd will become a separate company, with KKR holding a 60% stake as part of the agreement and Coty holding 40% of the new company, which will bear the name Wella.
While Coty was trying to sell its professional beauty division, the company responded to the coronavirus pandemic and the drop in stock prices from the outbreak caused by the cutting executive pay by a quarter in mid-April. Now, with KKR’s agreement, the company has achieved that goal.
The four brands make up Coty’s professional beauty and retail hair divisions. Divesting itself of these business areas may help Coty refocus on its large and popular luxury division.
Coty will receive US$ 3 billion in cash and most of the balance of sales of convertible preferred shares to KKR, one of the elements of the partnership between Coty and KKR. KKR also places two directors on Coty’s board.
With the spinoff, Coty expects to reduce fixed costs by $ 700 million. In terms of the company’s recovery plan, COO and CFO Pierre-Andre Terisse said the deal created “a greater sense of energy and enthusiasm”.
With information by The Motley Fool (Rhian Hunt)