It is finally official. After months of speculation, Coty Inc. has announced that it has agreed to buy 43 of Procter & Gamble Co.’s beauty brands for about $12.5 billion in a deal that would more than double its sales and transform it into one of the world’s largest cosmetics companies. With the new brads, Coty will have pro forma combined annual revenues of more than $10 billion based on fiscal year 2014 performance.
In a process called a Reverse Morris Trust, P&G Beauty will spin or split off the business from P&G, and merge it with a Coty subsidiary.
The brands in the deal include prestige fragrances Hugo Boss, Dolce & Gabbana and Gucci and the color cosmetics brands COVERGIRL and Max Factor.
The transaction also gives Coty an attractive new category in the beauty industry through the addition of P&G’s hair color business, led by Wella and Clairol.
The transaction will significantly expand Coty’s geographical footprint, providing scale in large beauty markets like Brazil and Japan, while also increasing critical mass in important geographies in which Coty currently operates, such as in North America, Europe, the Middle East and Asia.
The combined businesses have annual sales of more than $10 billion, compared with $4.55 billion for Coty in its most recent fiscal year.
Bart Becht, Coty Chairman and Interim Chief Executive Officer, will oversee a management team, including Coty Chief Financial Officer Patrice de Talhouët, together with a broader leadership organization consisting of executives from both businesses.
Coty says that the Board of Directors will not change as a result of the transaction.
The deal is expected to take about a year to close –the companies are aiming to finalize it by the second half of calendar year 2016. It is subject to regulatory clearances, and other customary conditions.
Transfer of certain fragrance brand licenses from P&G to Coty are subject to licensor consent.
P&G noted that the divestment marks a significant step forward as the company strives to streamline its portfolio and concentrate on core brands, which it sees as 10 categories and 65 brands.
“The merger with Coty, a strategic acquirer, will provide an excellent new home for these businesses and brands, as well as for the talented people who are operating them,” says P&G president and CEO, AG Lafley.
“We look forward to a successful transition and we will work together to maximize value for the shareholders of both companies.”