KKR - Coty slides amid news it will sell $150M stake in Wella to wealth manager

2023-07-18 09:41:40 ET

Coty ( NYSE: COTY ) slipped 0.3% on Tuesday morning after agreeing to sell part of its stake in hair coloring brand Wella to IGF Wealth Management for $150M .

COTY will sell a 3.6% stake in Wella reflecting a 4% premium to the book value of the hair brand as of March 31. COTY will retain a 22.3% stake in Wella with an implied valuation of about $900M. The transaction, which requires approval of Kohlberg Kravis Roberts & Co. L.P. ( KKR ), should close in the next two months.

The transaction advances the company’s objectives to deleverage, including reaching its target of driving leverage towards 3x exiting CY23.

"The expected transaction is a concrete step in our commitment to both fully divest our retained Wella stake and reach leverage of approximately 2x by end of CY25,” COTY Chief Financial Officer Laurent Mercier said in a statement.

In 2020, KKR provided COTY with an initial investment of $750M through the sale of convertible preferred shares to KKR, and agreed to buy a majority in Wella at a contemplated enterprise value of $4.3 billion, or 12.3x 2019 EBITDA.

Two years ago, COTY said it would sell a 9% stake in Wella to KKR in exchange for the redemption of approximately half of KKR’s remaining convertible preferred shares in COTY, reducing its total shareholding in the professional beauty company to approximately 30.6%.

The transaction reflected a 50% appreciation in Wella’s value since the 2020 closing of Coty’s 60% sale of Wella to KKR.

Shares of COTY are up more than 40% year-to-date.

More on Coty:

• Coty rises as Kim Kardashian said to want SKKN stake back
• Coty drops after Kim Kardashian news; Jefferies sees upside
• Kim Kardashian said to pre-IPO fundraise for Skims; would value brand at close to $4B
• Coty shares move higher after revenue forecast bump; risks remain

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