P&G CEO A.G. Lafley has made no secret of his plan to downsize its portfolio of brands in order to grow. Today, a major part of that strategy became clear with the news it’s getting out of the beauty business and selling 43 global brands to global beauty products manufacturer Coty.
The transformational deal, announced this morning, confirms rumors that P&G had reached an agreement to acquire Proctor and Gamble’s fragrance, cosmetics and hair color businesses, adding to an already robust portfolio. Now Coty will gain 43 of P&G’s brands in a deal valued at $12.5 billion and the acquisition will position Coty as one of the world’s largest beauty companies — and it’s expected to be come the global leader in fragrance and well-positioned to advance significantly in color cosmetics.
Morgan Stanley analysts are expecting this deal to double Coty’s annual sales. Coty says it expects to generate about $4.5 billion in annual sales from its newly expanded fragrance business, making it the world’s largest fragrance company by sales, and expects to become the third largest brand in the color and cosmetics sector, behind L’Oreal and Estee Lauder, as a result of this transaction.
P&G’s businesses include leading fragrance brands such as Dolce & Gabbana and Gucci and color cosmetics brands COVERGIRL—known for its campaigns starring celebrities including Katy Perry and Sofia Vergara—and Max Factor. Through the transaction, Coty will gain a hair color business, an attractive new category including brands Wella, Clairol and Sassoon. The transaction will also expand Coty’s geographical footprint with exposure in growing beauty markets like Brazil and Japan, while also increasing its brands presence in North America, Europe, the Middle East and Asia.
“With the Beauty talent from both sides and the fantastic portfolio of world-class brands, we have the opportunity to create a highly focused, pure-play leader and challenger in Beauty which can deliver exciting opportunities and benefits for employees, licensors, customers and suppliers,” said Bart Becht, Coty’s Chairman and Interim CEO.
“There is no question that with the broader offering of leading brands, strong brand support, the development of a better pipeline of innovative products and the much broader geographical reach and scale, COTY will strengthen its competitive position and ability to capitalize on revenue and profit growth opportunities over time,” he added.
P&G’s brands included in the transaction are Wella Professionals (and its sub-brands), Sebastian Professional, Clairol Professional, Sassoon Professional, Nioxin, SP (System Professional), Koleston, Soft Color, Color Charm, Wellaton, Natural Instincts, Nice & Easy, VS Salonist, VS ProSeries Color, Londa/Kadus, Miss Clairol, L’image, Bellady, Blondor, Welloxon, Shockwaves, New Wave, Design, Silvikrin, Wellaflex, Forte, Wella Styling, Wella Trend, Balsam Color, Hugo Boss, Dolce & Gabbana, Gucci, Lacoste, bruno banani, Christina Aguilera, Escada, Gabriela Sabatini, James Bond 007, Mexx, Stella McCartney, Alexander McQueen, Max Factor and Covergirl.
The transaction is expected to close in the second half of 2016, and sees P&G dedicating its focus on a slimmer portfolio of businesses and brands looking forward. It will also result in a workforce reduction worldwide and closure of some factories for P&G.
As P&G Chairman, President and Chief Executive Officer, AG Lafley, commented: “This represents a significant step forward in the work to focus our portfolio on 10 categories and 65 brands that best leverage P&G’s core competencies. We have leading global brand positions in these categories, consumer preferred products and leading brands in the largest markets. These businesses and brands have historically grown faster and have been more profitable than the balance. We expect these ten categories to grow and create value as we focus the energy and resources of the company exclusively on them.”
“The merger with Coty, a strategic acquirer, will provide an excellent new home for these businesses and brands, as well as for the talented people who are operating them. We look forward to a successful transition and we will work together to maximize value for the shareholders of both companies,” he added.