Coty Inc. [NYSE: COTY] disclosed that it has decided to sell its nearly 9% of holdings to KKR in exchange for the redemption of nearly half of KKR’s remaining convertible preferred shares in Coty. After the sale of 9% holdings in Wella, KKR has left with the ownership of 30.6% holdings. KKR believes that the pact with Coty allows each party to determine the significant value and growth created in each of the two businesses over the past year.
The deal will streamline Coty’s capital structure and lead to add roughly $26 million in annual dividend cash savings. It will include a total of $52 million in annual cash savings when combined with the KKR secondary share offering that was completed in September. Following the execution of the deal, KKR will cut its ownership to the equivalent of nearly 45 million Coty Class A shares. It signifies a total of a 5.2% stake in Coty.
Furthermore, this new deal will also provide additional profitable benefits to Coty through the decrease of its diluted share count. The suggested value of Coty’s remaining approximate 30.6% stake in Wella is around $1.38 billion, compared to the $1.26 billion book value of its 40% stake as of June 30, 2021.
In addition, the deal has indicated a 50% appreciation in Wella’s value since the completion of Coty’s 60% sale of Wella to KKR in December 2020, which coincided with the re-opening of global hair salons and the positive momentum in the Wella business. As payment for KKR’s acquisition of shares in Wella from Coty, Coty will redeem nearly half of KKR’s outstanding convertible preferred shares and accrued dividends, or the equivalent of nearly 47 million shares of the Company’s common stock.