Henkel, KKR Advance in Bidding for $8 Billion Coty Unit

Henkel AG, the German shampoo maker, and buyout firm KKR & Co. are among a small group of suitors proceeding to the second round of bidding for Coty Inc.’s professional hair and nail products business, people familiar with the matter said. 

Advent International and a separate consortium of Cinven and the Abu Dhabi Investment Authority weren’t chosen to advance to the next round after they submitted initial offers last week, the people said. Private equity firms Bain Capital and Clayton Dubilier & Rice dropped out of the race, according to the people, who asked not to be identified as the information is private. 

Some suitors have made bids for just the Good Hair Day business or Coty’s Brazilian operations, the people said. The entire unit, which owns brands including Wella and Clairol, could fetch $7 billion to $8 billion, Bloomberg News has reported. 

Shares of Coty jumped as much as 5.7% in U.S. trading Tuesday, the biggest intraday gain in more than a month, and were up 1.4% at 9:49 a.m. in New York. Henkel’s preferred shares gained as much as 3.5% in Frankfurt, the most since July.

Turbulent Markets

Unilever and cosmetics maker Boticario Group have been looking at parts of the business, people familiar with the matter said last month.

The sale comes at a time when stocks are being roiled by the spreading coronavirus and a slump in oil prices. The turbulence has spread to the credit markets, raising borrowing costs and making it tougher for private equity firms that depend on leverage to get deals done.

Proceeds could be used for “much-needed debt reduction and investment across skincare, cosmetics and fragrances to speed up agility and fix ebbing market shares,” according to Deborah Aitken, a senior industry analyst for Bloomberg Intelligence.

Coty’s banks are offering financing to help buyout firms fund the acquisition, a person with knowledge of the matter said last month.

Deal Firepower

A representative for Coty said the strategic review of its professional beauty business and Brazilian operations is “proceeding as planned.” The company expects to complete the process by summer 2020, within the contemplated timeframe, the Coty representative said.

Representatives for Advent, Bain, CD&R, Cinven, Henkel and KKR declined to comment, while a spokesperson for ADIA didn’t immediately respond to a request for comment.

Henkel’s new Chief Executive Officer Carsten Knobel said last week the company has the “firepower” to make acquisitions for business lines including beauty alongside asset disposals.

Advent and Cinven last month won a competitive auction to acquire Thyssenkrupp AG’s elevator division for 17.2 billion euros ($19.5 billion), making it the biggest private-equity deal in Europe in a decade.

Source: Bloomberg

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