P&G is selling of 43 of its beauty brands for US $12.5 billion to fragrance and beauty company Coty Inc.
According to a statement, the transaction will be conducted as a Reverse Morris Trust (RMT). This means that P&G will split off the business to merge with a Coty subsidiary to create a new entity. Following the transaction, P&G shareholders will own 52% of all outstanding shares of the combined company, while Coty’s existing shareholders would own the remaining 48%.
The 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. Some of the popular brands included in the transaction are Wella Professionals, Hugo Boss, Dolce & Gabbana, Gucci, Lacoste, Christina Aguilera, Escada, James Bond 007, Stella McCartney, Alexander McQueen, and Covergirl. According to WSJ, the beauty brands P&G is parting with have annual sales of US$5.9 billion.
P&G chairman, president and chief executive officer, AG Lafley, said that this represents a significant step for the company to focus its portfolio on 10 categories and 65 brands that best leverage P&G’s core competencies.
“We have leading global brand positions in these categories, consumer preferred products and leading brands in the largest markets. These businesses and brands have historically grown faster and have been more profitable than the balance. We expect these ten categories to grow and create value as we focus the energy and resources of the company exclusively on them,” he said. He added that the merger with Coty, a strategic acquirer, will provide an excellent new home for these businesses and brands, as well as for the talented people who are operating them.
P&G also stated in the press statement that it is targeting to pay dividends and retire shares worth up to US$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.
Earlier P&G announced that its Duracell battery business will be split off as a separate brand as the company zooms in on its faster growing brands. This comes as part of a massive streamlining exercise which P&G first announced in August last year.
P&G had then said that the company will sell, discontinue, merge or eliminate up to 100 brands in the next two years as part of a cost-cutting exercise – focusing on its top 70 to 80 brands. These 70 to 80 brands that will remain have accounted for 90% of the company’s sales and more than 95% of its profit in the past three years as a smaller and less complicated company will be easier to operate.