Coty has officially severed ties with the hair care industry to focus on balancing its books.
The beauty titan announced on Friday that it offloaded its remaining interest in Wella to investment firm KKR. This transaction, valued at $750 million, sees Coty sell its Wella stake completely, transferring the final 25.8% of ownership.
Markets reacted immediately to the liquidity boost. After plummeting over 70% in the last two years, Coty shares rebounded approximately 2% in premarket trading Friday.
Why Coty Sells Wella Stake: The Debt Strategy
Management intends to funnel the majority of this $750 million cash injection directly toward corporate debt.
Stabilizing the balance sheet is currently the company’s top priority following a season of severe financial strain. However, Coty did not walk away without insurance for the future.
The agreement includes a specific “upside” clause.
If KKR eventually takes Wella public or sells it, Coty retains rights to 45% of the proceeds. This provision activates only after KKR achieves a pre-determined return threshold on their investment.
Pivoting to Luxury Fragrance
This sale concludes a divestiture process that began in 2020.
Coty originally purchased Wella as part of a massive $12.5 billion acquisition from Procter & Gamble in 2015. Now, the company is reversing course to streamline operations.
The new strategy moves away from the hyper-competitive “mass beauty” and color cosmetics sectors. Instead, the firm is banking on its prestigious luxury fragrance portfolio. This segment controls lucrative licenses for major fashion powerhouses, including:
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Gucci
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Chloe
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Burberry
Leadership Rumble at the Top
The financial restructuring comes amidst rumors of a major boardroom overhaul.
JAB Holding, the controlling shareholder, is reportedly weighing a significant leadership shake-up. Industry reports suggest this reorganization could oust both the current board chair and the Chief Executive Officer.
Coty currently holds a market capitalization of roughly $2.8 billion. By shedding the Wella asset, the organization aims to simplify its business model and regain the trust of wary investors.
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