Coty-P&G Deal A 'Homerun' If It Happens: Here's Why
While neither company has commented on the rumors, a finalized deal would be one of the largest cosmetic transactions in a decade.
Stifel Comments On Story
In a new research note, Stifel analyst Mark Astrachan said such a deal would be "meaningfully accretive" for Coty shares. Of note, he holds a $28 price target on shares -- below Coty's current trading range.
"According to the article, the deal is to be structured as a Reverse Morris Trust, with P&G shareholders to own a majority of the combined business and Newco run by current Coty management," Astrachan said. "We estimate the P&G brands had F2014 sales and EBITDA of $5.6bn and $1.1bn, respectively, with a combined transaction value of 10.9x TTM EBITDA," he added.
The analyst said a Coty-P&G deal would be a "homerun" for the former, and would more than double the company's revenue and earnings footprint, while reducing costs.
There are still risks, though, he said. "[T]he assumed multiple discount to Coty and HPC peers likely reflects required reinvestment to improve recent market share underperformance for the P&G brands," Astrachan concluded.
Latest Ratings for COTY
|Oct 2016||Bank of America||Upgrades||Neutral||Buy|
|Sep 2016||B. Riley||Upgrades||Sell||Neutral|
|Sep 2016||Berenberg||Initiates Coverage on||Sell|
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