Companies and Brands
Can an $8 Billion Buyout Breathe Some Life Into Coty Stock?
Published:
After Coty Inc. (NYSE: COTY) paid Procter & Gamble Co. (NYSE: PG) $12.5 billion for a truckload of beauty and cosmetic brands in a deal announced in 2015, Coty stock dropped 19%, So the company boosted its dividend by 25% (to $0.25 annually) in an effort to buy back investors’ affections. It only helped a little.
Since that July 2015 announcement, Coty’s stock has lost about 59% of its value, while the S&P 500 has gained more than 68%. Now, according to a report at Bloomberg News, Coty is looking to sell some of the brands it acquired from P&G, and the sale could fetch as much as $8 billion.
Among the potential buyers, according to unnamed “people with knowledge of the matter,” buyout firms like Advent, Bain Capital and KKR are interested and preparing to make bids in a first round that is due in the first week of March.
The potential sale reportedly includes Coty’s professional hair and nails products, which posted net revenues of $528.8 million in the company’s second fiscal quarter ended in December. Adjusted operating income was $90.8 million and adjusted operating margin was 17.2%.
Coty, which is controlled by European investment firm JAB, is looking to sell brands including Clairol, Good Hair Day, and OPI nail care, along with Coty’s Brazilian business. Last year, Coty paid $600 million for a majority interest in Kylie Jenner’s cosmetics line.
Also last year, Coty wrote down $3 billion of the $12.5 billion it spent to buy the brands from P&G. Coty had earlier in the year taken an impairment charge of nearly $1 billion on the acquisition.
If Coty goes through with the sale, and if the price it can bring is around $8 billion, that would be quite a coup. That implies that the consumer and luxury brands Coty acquired from P&G are essentially worthless or have skyrocketed in value.
Either way, Coty enjoys an infusion of cash and shareholders are likely to see an even higher dividend. The company now pays an annual dividend of $0.50 per share, double its late 2015 level. The dividend yield on the stock is 4.38%.
In premarket trading Wednesday, Coty stock traded up about 1.2%, at $11.68 in a 52-week range of $8.61 to $14.14. The 12-month consensus price target on the stock is $12.92.
Want to Retire Early? Start Here (Sponsor)
Want retirement to come a few years earlier than you’d planned? Or are you ready to retire now, but want an extra set of eyes on your finances?
Now you can speak with up to 3 financial experts in your area for FREE. By simply clicking here you can begin to match with financial professionals who can help you build your plan to retire early. And the best part? The first conversation with them is free.
Click here to match with up to 3 financial pros who would be excited to help you make financial decisions.
Have questions about retirement or personal finance? Email us at [email protected]!
By emailing your questions to 24/7 Wall St., you agree to have them published anonymously on a673b.bigscoots-temp.com.
By submitting your story, you understand and agree that we may use your story, or versions of it, in all media and platforms, including via third parties.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.
Latest from 24/7
