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Coty Agrees To Sell Professional And Retail Hair Business To KKR - Quick Facts

Coty Inc. (COTY) announced Monday the signing of a definitive agreement with KKR as part of a strategic transformation that will deleverage its balance sheet, streamline its operations and strengthen its leadership team.

Under the definitive agreement, Coty and KKR have entered into a strategic transaction for Coty's Professional and Retail Hair business, including the Wella, Clairol, OPI and ghd brands, valuing the businesses at $4.3 billion on a cash- and debt-free basis.

KKR will own 60% of this separately managed entity and Coty will own the remaining 40%. As previously announced, KKR is investing $1 billion directly into Coty through the issuance of convertible preferred shares.

The additional liquidity, via the $1 billion convertible issuance coupled with the anticipated $2.5 billion in net cash proceeds at the closing of this deal, improve Coty's leverage profile, providing the company with the flexibility to navigate through the current challenges and continue investing in its brands.

The sale of a majority interest in the Professional and Retail Hair business simplifies Coty's portfolio and will allow Coty to focus on its core Prestige and Mass Beauty businesses.

Excluding the businesses, Coty is targeting a net reduction in fixed costs of approximately $600 million in cash over the next 3 years. The one-off costs associated with this program are estimated at $500 million.

At the closing of the deal, expected in the next six to nine months, the Wella business is anticipated to issue approximately $1 billion of debt and distribute the proceeds to its respective shareholders. This will result in total net cash proceeds to Coty of approximately $2.5 billion

Additionally, Coty Founder and Chairman Peter Harf will assume the additional role of Chief Executive Officer. Previously, Pierre Laubies stepped down as Chief Executive Officer on May 31, 2020.

The creation of a three-person Executive Committee will also allow the company to increase the speed of its decision making and execution and create clear accountability for improved performance.

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