UBS Analyst Explains How Coty Will Be Able To Pay For It's $12 Billion Acquisition of Procter & Gamble's Beauty Products Unit

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Recent reports from various outlets have suugested that Coty Inc COTY has won the auction to buy the beauty products unit of Procter & Gamble Co PG for $12 billion. Following this news, shares of Coty opened higher today and continue to trade up with gains of over 19% at the time of writing.


Stephen Powers, UBS analyst, was on CNBC Tuesday to discuss this deal.


Reverse Morris Trust Transaction


Powers was asked how will Coty be able to pay for this deal. He replied, “Well there’s a lot of speculation out there, but my guess is that this will be a Reverse Morris Trust, out of Procter into Coty. So, after this transaction is consummated, P&G shareholders will technically be in control of the company.”


He went on, “Current Coty shareholders will own somewhere about in the high-40 percent of the new Coty. But will for all its purposes run the company and control the company. So, it will be a Reverse Morris Trust, which for P&G shareholders will be tax-free. It will be effectively cashless for Coty shareholders.”


Powers thinks that the impact of debt on Coty’s balance sheets due to this transaction will “be very minimal. I think, it will be more of a share exchange.”


Huge Footprint Across Beauty


On Coty’s growth prospects post this transaction, Powers said, “This will definitely change Coty dramatically. It will give a huge, much more substantial footprint across beauty, it will give them a significant amount of cost synergy to execute on the combined business and it should theoretically give them other avenues for growth. These are good brands, but they are brands that have been of low priority for Procter, they will obviously be of high priority for Coty.”

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Posted In: CNBCMedia
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