Coty buying 43 beauty brands from Procter & Gamble

The consumer goods giant announced on Thursday that it is selling 43 of its beauty brands, including Miss Clairol, Covergirl and Max Factor.

Among the 43 beauty brands included in the transaction are fragrances Dolce & Gabbana and Gucci, cosmetics brand CoverGirl and hair coloring brand Clairol.

Coty’s large, existing portfolio of beauty and fragrance brands includes Calvin Klein, Sally Hansen, Chloé, Davidoff, Marc Jacobs, OPI, Philosophy, Playboy and Rimmel.

Coty stated the deal valued the P&G Beauty Business at $12.5 billion on the time of the proposal, based mostly on the variety of Coty…

The deal will see Coty nearly double its earning power to $10bn per annum at the expense of P&G taking a 52 per cent controlling stake in the New York-based firm.

The deal with Coty might not be completed until the second half of 2016 as it looks to use a Reverse Morris Trust to avoid paying a large tax bill on the deal. Under a split off, P&G shareholders would be offered the chance to trade all, a few or none of their P&G shares for new Coty shares.

Corporate spinoffs have become common as companies look to become more streamlined and recapture value of core brands.

Earlier this year P&G announced plans to sell off Duracell batteries to Warren Buffett’s Berkshire Hathaway.

“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”, stated P&G chairman, president and CEO AG Lafley.

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Coty, which is trying to staunch a decline in sales, said it expects hair color products to account for 24 percent of total sales after the deal is completed. Parting with these beauty brands really seems like a natural progression for P&G. These businesses and brands have historically grown faster and have been more profitable than the balance.

The global beauty and personal care market is generally in healthy shape: reported by data from Euromonitor, the market for these products grew 1.6 percent previous year, and is expected to see even stronger growth this year. In the most recent quarter, for example, the company said that its sales were weak largely due to a lower volume of sales overall and, in particular, in its prestige fragrance and mass-market skin care brands. Coty anticipates about $550 million in cost savings on an annual basis over the next three years and approximately $500 million in one-time costs.