Coty Inc. (NYSE:COTY) stock rose Friday after it disclosed the sale of its remaining 25.8% stake in Wella to KKR & Co. Inc. (NYSE:KKR)–managed accounts and affiliates.
The company is selling a stake for an upfront cash of $750 million and 45% of any future sale or IPO proceeds after KKR’s preferred return.
Given Wella’s strong performance and current market valuations, Coty expects potential additional cash proceeds, bringing total returns close to the investment’s carrying value.
The company plans to use most of the Wella sale proceeds, after taxes, to pay down short- and long-term debt.
Combined with the strong free cash flow of over $350 million in the first half of fiscal 2026, this is expected to lower Coty’s net leverage to around 3x by the end of 2025.
Management Commentary
Laurent Mercier, Coty’s CFO, said, “Our strategic partnership with KKR has proven highly value accretive. We have benefited from Wella’s strong growth by progressively monetizing our stake, allowing us to strengthen Coty’s financial foundations year after year.”
“Completing this transaction exactly in line with our original target to fully divest Wella by the end of CY25 underscores our focus on delivering on our financial commitments and crystallizing value from non-core assets, all while sharpening our strategic focus.”
Recent Earnings
In November, the company reported first-quarter adjusted EPS of 12 cents, which missed the consensus of 15 cents, while revenue came in at $1.577 billion, in line with expectations.
Coty expects gradual sales improvement in fiscal 2026, with second-quarter LFL sales likely at the high end of the -3% to -5% range, led by Prestige and Consumer Beauty.
A low-to-mid single-digit FX boost is expected, and LFL growth is forecast for the second half of fiscal 2026, supported by key Prestige launches and easier comparisons.
COTY Price Action: Coty shares were up 0.92% at $3.28 during premarket trading on Friday, according to Benzinga Pro data.
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