Coty Sells Remaining Stake in Haircare Brand Wella to KKR

(Bloomberg) — Coty Inc. has sold its remaining stake in Wella to KKR & Co. for $750 million in cash and rights to certain future proceeds as the beauty company works to reduce its debt load.

It will get 45% of the proceeds from any Wella sale or initial public offering after KKR’s preferred return has been met, the company said in a statement, confirming an earlier report by Bloomberg News. It said most of the $750 million upfront cash will be used to pay down debt, a key goal for Coty’s leadership.

Coty shares rose as much as 3.1% in New York.

The sale is in line with the company’s target of fully divesting from Wella by the end of 2025, Coty Chief Financial Officer Laurent Mercier said. Coty valued its 25.8% stake in Wella at about $1 billion in November.

The sale will help drive net leverage down to about 3 times net debt to adjusted earnings before interest, taxes, depreciation and amortization by the end of 2025, from 3.7 times at the end of June, Bloomberg Intelligence analysts Julie Hung and Tatiana Bellometti wrote in a research note. Coty’s consumer beauty cosmetics and Brazil segments remain under review, they said.

“Any future potential sale would help promote further deleveraging,” they added.

Coty acquired Wella in 2015 from Procter & Gamble Co. as part of a larger transaction. KKR then bought a 60% stake in the business in 2020.

Coty’s shares have slumped more than 50% over the past 12 months, despite relatively strong overall demand for fragrance and cosmetics in the wake of a post-pandemic beauty boom.

–With assistance from Nurin Sofia.

(Updates with shares in the third paragraph, analyst comment in the fifth and sixth graphs.)

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