Billion-Dollar Deal for Coty and P&G

Coty is acquiring 43 of Procter & Gamble’s beauty brands in a complicated deal valued at $12.5 billion. The agreement, a Reverse Morris Trust (RMT) transaction, includes P&G’s global salon professional hair care and color, retail hair color, cosmetics and fine fragrance businesses, along with select hair styling brands.

The move will double the size of Coty, creating a $10 billion player in the global beauty industry. Specifically, the move will make Coty the global leader in fragrances and significantly enhance its position in color cosmetics. P&G’s businesses include leading fragrance brands such as Hugo Boss, Dolce & Gabbana and Gucci and the color cosmetics brands CoverGirl and Max Factor. The transaction also gives Coty an attractive new category in the beauty industry through the addition of P&G’s hair color business, led by Wella and Clairol. 

P&G currently estimates the one-time gain will be in the range of $5 billion to $7 billion depending on the final deal value at the time of closing. Beginning with fiscal year 2015-16 reported results, the earnings from the RMT brands will be reported as discontinued operations (i.e. removed from core earnings per share) in both the current and prior year periods. The specific earnings amount to be restated will be provided at a later date. P&G is targeting to pay dividends and retire shares worth up to $70 billion over a four-year period from fiscal years 2016 to 2019 through a combination of shares eliminated via this RMT brands transaction and the previously announced Duracell transaction, ongoing discretionary share repurchase and continuing its strong history of dividend payments.