Coty is selling around 9 percent of its stake in professional haircare company Wella to KKR & Co for $426.5 million, the company announced Friday.
The deal is in exchange for the redemption of nearly half of KKR’s remaining convertible preferred shares in Coty and it is expected to close in the second quarter of Coty’s fiscal year 2022. The sale cuts Coty’s stake in Wella to 30.6 percent, valued at nearly $1.38 billion.
The company noted that its stake in Wella had increased in value as the reopening of salons in markets around the world has triggered an increase in demand. It expects the deal to help simplify its capital structure and save the company some $52 million annually while boosting its overall profits.
“The value of Wella has increased significantly since we undertook our partial divestment in 2020 and KKR became our strategic partner in the Wella business. Today’s announcement is a testament of our initial investment strategy of capitalizing on the expected increase in Wella’s value over time to further our dual agenda of deleveraging and simplifying Coty’s capital structure, with the added benefits of improving our cash flow and driving EPS accretion,” said Laurent Mercier, Coty’s chief financial officer. “Our remaining stake in Wella remains a key financial asset for Coty, which we expect to bring further value over time.”
The deal will result in a reduction of KKR’s ownership in the Gucci and Hugo Boss fragrance maker to about 45 million Coty Class A shares, representing a stake of slightly more than 5 percent.