Coty Raises Nearly $1 Billion In IPO, Shares Slide Nearly 3%

Coty COTY priced its much-anticipated IPO Wednesday after the close in the mid-point of the expected range. Coty sold 57.1 million shares at $17.50 per share, the midpoint of the targeted $16.50-$18.50 range.

$1 Billion IPO

Coty raised $999.25 million in its much anticipated IPO. The maker of perfumes endorsed by celebrities including Heide Klum and Beyonce had insiders including the controlling Reimann family as well as Berkshire Partners LLC, unaffiliated with Warren Buffett's Berkshire Hathaway BRK BRK and Rhone Capital LLC. The Reimann Family will retain an 85 percent ownership stake and control 70 percent of the voting rights.

Coty will trade at 11 times EBITDA upon the issue, slightly below industry averages. Coty will pay an annual cash dividend of $0.15, bringing the yield to 0.86 percent upon the issue. Revenues grew 12.85 percent from June of 2011 to June of 2012 and have grown marginally over the nine month period ended March from 2012 to 2013.

Capitalization

The capitalization of Coty is just under $4 billion. It is important to note that Coty has a dual class share which protects the voting power of the controlling family and other old investors.

As of March 31, Coty had just under $800 million in cash and cash equivalents against $42.2 million in short term debt. With $500 million in outstanding senior notes and a nearly $2 billion credit facility, the company has about $2.5 billion in total credit liabilities. The total debt brings the debt to equity ratio to about 0.5.

Fragrances Key

In fiscal year 2012, more than half of the company's revenues came from fragrances. Fragrances accounted for $2.45 billion of the company's $4.61 billion in sales, about 53 percent. Meanwhile, cosmetics made up 31 percent of sales and the remainder was filled by the company's sales of skin and body care products.

New York-based Coty was founded in 1904 in Paris by Corsican-born Francois Coty. The company owns the color cosmetics brand OPI and has a licensing agreement to sell the Adidas line of skin-care products alongside its self-branded lines.

Shares Open

Shares traded lower on the day after the opening. After initially popping to $17.52 from the issuance of $17.50, shares fell to a low of $16.91. At 10:19 am, shares traded at $17.00, down $0.50 or 2.86 percent.