Coty nears deal to buy three P&G brands for about $12 billion
16 June 2015
Coty Inc, the $4.6 billion US cosmetics group has won an auction to acquire Wella hair care and Max Factor and CoverGirl makeup brands from Procter & Gamble Co (P&G) for as much as $12 billion, the New York Post yesterday reported, citing sources familiar with the deal.
The sale comes less than a year after P&G sold its Duracell battery business to Warren Buffett's investment arm Berkshire Hathaway in a stock swap deal worth $3 billion and most of its pet food business to Mars Inc for $2.9 billion (See: Warren Buffett to buy Duracell from P&G in a stock swap deal worth $3 bn).
Last December, it also sold its Camay and the Zest brands outside of North America and the Caribbean and the Talisman manufacturing facility in Mexico to Unilever for an undisclosed amount.
After years of expansion into lines like pet food and beauty products, P&G, which also makes Gillette razors, had said in August last year that it would cut as many as 100 brands from its portfolio to focus on others, like Tide detergent, which has made the company a powerhouse over the decades (See: P&G to cut 100 underperforming brands, focus on key products).
The sale is also part of the company's strategy to improve its financial performance by focusing on about 80 brands that generate 95 per cent of the profits and 90 per cent of sales.
P&G, the world's largest consumer products company, had acquired Wella in 2003 from the heirs of founding Ströher family for €6.5 billion ($7.1 billion), including debt of €1.1 billion. The deal was then the biggest acquisition in P&G's history.
Founded in 1880 by Franz Ströher, a hairdresser from Wella, which specialises in haircare, styling and colourants, with its products being sold in over 150 countries.
The company has three main divisions: Professional Hair Cosmetics, Consumer Hair Cosmetics, and Cosmetics and Fragrances.
Its Professional unit that sells hair care products to professional hairdressers under the brand names Wella, Sebastian, Graham Webb, Kadus, Londa, Welonda, Belvedere, and Tondeo accounts for nearly 50 per cent of group sales, while the Consumer division, which focuses on hair coloring products along with care and styling products, generates over 30 per cent of total Wella sales and Cosmetics and Fragrances unit accounts for 20 per cent.
Its main competitors are Alberto-Culver Co, Beiersdorf AG, L'Oréal SA, and Johnson & Johnson.
Founded in 1909 as Max Factor & Company, by Max Factor, a Polish-Jewish cosmetician from Poland and until its sale in 1973 for $500 million the company was owned by several generations of the family.
P&G purchased it in 1991 from Revlon Inc for $1.14 billion, whose annual sales was around $600 million.
CoverGirl, the American cosmetics brand was founded in Maryland, by the Noxzema Chemical Company (later called Noxell) and acquired by P&G in 1989.
P&G is also said to be exploring the sale of Braun - its electric razors and toothbrushes unit, which it acquired as part of its $57 billion purchase of Gillette in 2005.
New York-based Coty is owned by Vienna-based Joh A Benckiser, the German holding company that manages the interests of the billionaire Reimann family of Germany, who also owns a substantial stake in Reckitt Benckiser, the world's largest maker of household cleaners.
With annual turnover of around $4.6 billion, Coty was founded in Paris in 1904 by François Coty, who is credited with founding the modern fragrance industry. The company holds a 48-per cent share of the US fragrance market.
The 108 year-old company develops and manufactures beauty care products that include fragrances, toiletries, and colour cosmetics, and skin care, sun care, and personal care products. Its Jennifer Lopez perfume has raked in $1 billion in sales since being introduced in 2002.
The Coty brand portfolio is distributed in prestige and ultra-prestige stores and includes Calvin Klein, Davidoff, Jennifer Lopez, Sarah Jessica Parker, Adidas, Beyoncé Knowles, Celine Dion, David and Victoria Beckham, Esprit, Pierre Cardin, Playboy, Shania Twain, Stetson, and Tonino Lamborghini among others.