Following much speculation over the past few weeks, it seems that P&G has indeed accepted Coty’s $12 billion offer to purchase dozens of the beauty brands the giant global consumer company is divesting itself of in hopes of becoming more profitable with a smaller portfolio. Today, P&G signed a definitive agreement to merge 43 of its beauty brands (“RMT Brands”) with Coty Inc., in a Reverse Morris Trust transaction. The deal is wide-ranging, including P&G’s “global salon professional hair care and color, retail hair color, cosmetics and fine fragrance businesses, along with select hair styling brands.”
 
P&G chairman, president and chief executive officer A.G. Lafley said that 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.”

Following the transaction, P&G shareholders will own 52% of all outstanding shares on a fully diluted basis (inclusive of all outstanding equity grants), while COTY’s existing shareholders would own 48% percent of the combined company.

Brands to be Merged with Coty
The brands included in the transaction are Wella Professionals (and its sub-brands), Sebastian Professional, Clairol Professional, Sassoon Professional, Nioxin, SP (System Professional), Koleston, Soft Color, Color Charm, Wellaton, Natural Instincts, Nice & Easy, VS Salonist, VS ProSeries Color, Londa/Kadus, Miss Clairol, L’image, Bellady, Blondor, Welloxon, Shockwaves, New Wave, Design, Silvikrin, Wellaflex, Forte, Wella Styling, Wella Trend, Balsam Color, Hugo Boss, Dolce & Gabbana, Gucci, Lacoste, bruno banani, Christina Aguilera, Escada, Gabriela Sabatini, James Bond 007, Mexx, Stella McCartney, Alexander McQueen, Max Factor and Covergirl.

The transaction will instantly create one of the world’s largest beauty companies, with pro forma combined annual revenues of more than $10 billion based on fiscal year 2014 performance, strengthening its leadership position in the $300 billion global beauty industry.  Together with P&G’s businesses, COTY is expected to become the global leader in fragrances and to significantly enhance its position in color cosmetics.  P&G’s businesses include leading fragrance brands such as 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.
Bart Becht, Chairman and Interim CEO of COTY, commented:  “With the Beauty talent from both sides and the fantastic portfolio of world-class brands, we have the opportunity to create a highly focused, pure-play leader and challenger in Beauty which can deliver exciting opportunities and benefits for employees, licensors, customers and suppliers. There is no question that with the broader offering of leading brands, strong brand support, the development of a better pipeline of innovative products and the much broader geographical reach and scale, COTY will strengthen its competitive position and ability to capitalize on revenue and profit growth opportunities over time. Additionally, our combined operational and financial platform will allow us to drive meaningful EPS accretion and generate substantial incremental free cash flow over the long term, giving us a strong balance sheet with a conservative leverage profile.  All of this has the potential to lead to accelerated value creation for COTY shareholders.”