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The beauty products company Coty agreed to sell a stake in its business to private equity firm KKR. The announcement pushed the Coty stock price higher.
Coty Inc (NYSE: COTY) stock gained 20% in the last trading session. This happened as KKR & Co Inc (NYSE: KKR) indicated that it would buy a 60% stake in Coty’s retail business. Sources say that KKR led by Henry Kravis will acquire COTY’s hair and nail brands in a deal worth $4.3 billion. The cachet of brands includes OPI, Wella, and Clairol.
Coty stock started dipping after Kylie Jenner had issues concerning her networth with Forbes Magazine. Forbes accused Jenner of falsifying evidence of her net worth. She was also caused of lying to the media about her finances.
Coty stock price fell by as much as 13% at the news on Friday. Yesterday Coty stock price was at $4.39 re-market, it is $4.63 (+5.47%). KKR stock was at $28.29 re-market is $28.66 (+1.31%).
Coty had before now bought a majority stake in Kyle Jenners’ business. The focus was to use Kyle’s celebrity status to sell. This included the use of Kyle Jenner’s social media superstar status as well. The deal was worth $600 million with a business was worth $1.2 billion.
Coty Stock Rises Despite Issues with Forbes
Forbes said that Jenner allegedly falsified tax returns between 2016 till date. The media organization also said that analysis from Rakuten indicated that a 62% decline in sales between 2016-2018. Forbes also relied on expert opinions on the irregular business model presented. Experts in the cosmetic industry disagreed with Kyle’s strategy and operations. While the Jenners have denied these claims in a statement Forbes still stands by its claims.
” More likely: The business was never that big, to begin with, and the Jenners have lied about it every year since 2016—including having their accountant draft tax returns with false numbers—to help juice Forbes’ estimates of Kylie’s earnings and net worth”.
The great thing though is that COTY has been able to shed much of the weight coming from the Kyle issue. As a part of its reorganization, COTY (COTY) Chairman Peter Harf has been named as CEO by the parent company of Cover Girl and Kylie Cosmetics.
This is a departure from expectations though. Jimmy Choo Executive Pierre Dennis was supposed to become CEO in February.
KKR Searches for New Opportunities
KKR as a private equity company has been one of those looking for diamonds in the rough. The firm acquired Viridor Waste Management Company Limited for $4.2 billion in March. Their portfolio has totally unrelated businesses that usually turn out to be stars.
KKR is expected to finish up with the acquisition within six months. The firm is also expected to invest about $1 billion into Coty. This will be done via the issuance of convertible preferred shares.
As Coty continues to struggle, one thing is certain: it won’t be business as usual. Forbes has alleged that Kyle has broken every rule to make her net worth look bigger than it is.
The good thing though is that the reality of the situation will be obvious in a few years. Mother time knows best in this regard.