On Friday, Coty sells Wella stake to U.S. investment firm KKR for $750 million, removing its remaining 25.8% share in the haircare brand from its portfolio. Despite the sale, Coty will continue to earn a share of future proceeds if KKR sells Wella again or takes it public. This step aligns with Coty’s strategy to simplify operations and focus on high-value segments.
Coty Retains Rights to Future Earnings
Coty will claim 45% of any proceeds from a future sale or IPO after KKR meets its preferred return. The company plans to apply most of the cash to pay down debt, which strengthens its balance sheet. By acting now, Coty aims to secure financial flexibility while keeping potential upside from Wella’s growth.
Streamlining the Portfolio
The Wella sale fulfills a plan Coty started in 2020 to maximize the brand’s value and focus on its core business. Earlier this year, Coty reviewed other beauty brands, including Rimmel and CoverGirl, to identify possible divestitures. As a result, the company can now concentrate more on fragrances, responding to weaker demand for color cosmetics.
Market Performance and Company Overview
Coty’s shares have fallen almost 50% this year, reflecting challenges across the beauty market. Founded in Paris in 1904, Coty holds fragrance licenses for global brands such as Gucci, Chloé, and Burberry. According to LSEG data, the company currently has a market capitalization of around $2.8 billion. By refocusing on its strongest segments, Coty hopes to improve profitability over time.
Looking Ahead
Analysts view the Wella stake sale as a positive step in Coty’s restructuring. The deal provides immediate liquidity and allows the company to prioritize its core fragrance business. At the same time, retaining rights to future Wella proceeds gives Coty the potential to benefit from any increase in the brand’s value.
