Unilever, Henkel Looking To Acquire Coty’s $7 Billion Beauty Brands

Consumer goods majors Unilever and Henkel and a few buyout funds are reportedly in talks with American cosmetics maker Coty to acquire some of its most popular beauty brands.

Coty makes cosmetic, skin, fragrance and hair brands. The $9 billion Coty has a majority stake by German conglomerate JAB Holdings.

Coty had announced an auction in December and was looking for bidders for a new owner for its professional hair and nail care brands, per Reuters report.

Coty’s portfolio includes Wella, Clairol, GHD, and OPI worth up to $7 billion. Coty’s professional beauty portfolio accounts for 20 percent of its total revenue. However, the segment was under stress in the last four quarters and Coty decided to reduce its exposure to the professional segment.

Aiming to complete the sale by June 2020 Coty has hired Credit Suisse to handle prospective bidders.

Bankers advising the bidders view the portfolio is lucrative and has the potential to fetch 10 to 12 times its current earnings of roughly $600 million. They see a valuation of around $6 to $7 billion, the sources in the report said.

Among the financial sponsors are Advent, Blackstone, KKR, CVC Capital Partners and BC Partners.

Coty CEO Pierre Laubies said in October that the sale would help the company to improve its ability to invest in areas with significant growth potential.

Some reports also said Colgate-Palmolive may also join the race for growing its skincare units. The main competitors of Coty include L'Oréal, Estee Lauder, Revlon, P&G, Unilever, Kao, Luxasia, Clarins, Pierre Fabre, and Shiseido.

Coty picks stake in Kylie Jenner company

Meanwhile, Coty and Kylie Jenner announced a strategic partnership on Nov.18 to jointly build and develop Kylie’s existing beauty business into a global powerhouse brand. Under the deal, Coty took a 51 percent stake in Jenner’s cosmetic company.

Coty acquired the stake for $600million. The deal is expected to close in the third quarter of the fiscal year 2020.

Kylie has more than 270 million followers across her personal and brand on social media channels. Kylie Cosmetics and Kylie Skin are the fastest-growing beauty brands on social media.

Coty CEO Laubies said: “We are pleased to welcome Kylie into our organization and family. Combining Kylie’s creative vision and unparalleled consumer interest with Coty’s expertise and leadership in prestige beauty products is an exciting next step in our transformation.”

Coty recently said its brands selling on Amazon had 40 clocked percent more sales growth in the first quarter and was a key to the company’s turnaround. The brands included Cover Girl, Rimmel, and Sally Hansen.

Meanwhile, Coty’s deal with Kylie Jenner’s company has pushed up the brand’s stock more than 2 percent. According to analyst Matt Maley, an equity strategist at Miller Tabak, the rallying stock of Coty is a “risky bet with a worthy reward,” per CNBC report.