Coty Sells Remaining 25.8% Stake in Wella to KKR for $750 Million, Securing Future IPO Upside
Coty Completes Wella Divestment with $750 Million Sale to KKR
Coty Inc. announced on Friday the sale of its remaining 25.8% stake in the professional beauty company Wella to private equity firm KKR & Co. Inc. The deal, which provides Coty with an upfront cash consideration of $750 million, marks the final step in the beauty giant's strategic exit from the haircare business.
Strategic Shift and Valuation Discrepancy
The divestment aligns with Coty's long-term strategy to streamline its portfolio and concentrate resources on its core prestige and consumer beauty brands, which include fragrances, cosmetics, and skincare. The transaction follows a previous sale in November, where Coty sold a 9% stake in Wella to KKR, an action that valued the entire Wella unit at approximately $4.5 billion.
The $750 million price tag for the 25.8% stake is notably lower than the $1 billion valuation Coty had previously assigned to the holding in November. This discrepancy suggests a potential adjustment in the market's perception of Wella's value or a strategic decision by Coty to prioritize immediate liquidity and the upside potential embedded in the deal structure.
Financial Structure and Future Upside
While the immediate cash injection is substantial, the terms of the transaction include a crucial provision that links Coty to Wella's future financial success. Under the agreement, Coty will receive:
- An upfront cash payment of $750 million.
- 45% of any proceeds from a further sale or an initial public offering (IPO) of Wella.
This structure allows Coty to monetize its non-core asset immediately while retaining a significant financial interest in the potential appreciation of Wella under KKR's ownership. Should KKR successfully grow Wella and execute a high-value exit, Coty stands to gain a substantial payout, mitigating the lower immediate valuation.
“The sale of our remaining stake in Wella to KKR is a pivotal moment for Coty, providing significant capital to strengthen our balance sheet and allowing us to fully focus on accelerating growth in our core beauty segments,” a representative close to the transaction stated.
Impact on Coty and KKR
For Coty, the $750 million cash infusion is expected to be utilized for debt reduction and investment in high-growth areas within its core business. The company has been actively working to improve its financial leverage following the initial separation of Wella in 2020.
For KKR, the acquisition of the remaining stake solidifies its control over Wella, enabling the private equity firm to fully execute its operational and strategic plans for the professional haircare brand ahead of a potential future liquidity event, such as an IPO. KKR initially acquired a majority stake in Wella from Coty in 2020.
