Coty Divests 3.6% Stake In Wella Brand For $150M

Coty Inc COTY has entered into a binding letter of intent to sell a portion of its Wella beauty and hair care brand stake to investment firm IGF Wealth Management.

Coty will sell a 3.6% stake in Wella for $150 million, reflecting a 4% premium to the book value of Wella as of March 31, 2023.

After the transaction, Coty will retain a 22.3% stake in Wella with an implied valuation of about $900 million. 

The deal is expected to advance Coty's objectives to actively deleverage, including reaching its target of driving leverage towards 3x exiting CY23.

The divestment is expected to close in the next two months, subject to certain closing conditions.

"Coupling this deleveraging with a best-in-class medium term growth algorithm, an active capital return program, including $400 million in targeted future share buybacks, and the continued momentum in our business, it is clear that we are reinforcing Coty's position as a beauty powerhouse," said Chief Financial Officer Laurent Mercier.

Recently, COTY increased Q4 FY23 guidance for revenue growth to 12% to 15% on a like-for-like (LFL) basis, versus the previous outlook for 10% growth, led by solid momentum in Prestige and the recovery in the China market. 

The company held $277 million in cash and equivalents as of March 31, 2023.

Coty is a beauty company with a portfolio of brands across fragrance, color cosmetics, and skin and body care. 

Price Action: COTY shares closed higher by 1.23% at $12.37 on Monday.