Coty buys P&G's beauty business in a $12.5 bn deal

Coty Inc has acquired Procter & Gamble’s (P&G) beauty business – comprising fine fragrance, colour cosmetics, and hair colour businesses – in a deal which valued the acquired business at approximately $12.5 billion. Coty Inc has signed a definitive agreement to merge P&G’s beauty business into Coty through a tax-free Reverse Morris Trust transaction. Following the transaction, P&G shareholders will own 52% of all outstanding shares on a fully diluted basis (inclusive of all outstanding equity grants), while Coty’s existing shareholders would own 48% percent of the combined company.
 
The transaction will instantly create one of the world’s largest beauty companies, with pro forma combined annual revenues of more than $10 billion based on fiscal year 2014 performance, strengthening its leadership position in the $300 billion global beauty industry.  Together with P&G’s businesses, Coty is expected to become the global leader in fragrances and to significantly enhance its position in colour cosmetics. P&G’s businesses include leading fragrance brands such as Hugo Boss, Dolce & Gabbana and Gucci and the colour cosmetics brands Covergirl and Max Factor.
 
The transaction also gives Coty an attractive new category in the beauty industry through the addition of P&G’s hair colour business, led by Wella and Clairol. The transaction will significantly expand Coty’s geographical footprint, providing scale in large beauty markets such as Brazil and Japan, while also increasing critical mass in important geographies in which Coty currently operates, such as in North America, Europe, the Middle East and Asia.
 
The transaction will be effected through a Reverse Morris Trust structure, which involves the separation of the P&G’s beauty business from P&G, followed by its merger with a subsidiary of Coty.