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    Breaking News

    Kline Says KKR Scored Big in the Coty Deal, Due to Covid-19

    Kline says, 'If a deal had been reached by the end of 2019, the outcome likely would have been different.'

    Kline Says KKR Scored Big in the Coty Deal, Due to Covid-19
    Kline Comments on the Coty-KKR Deal
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    Beauty Packaging Staff05.12.20

    Coty just made a deal with KKR, selling 60% of its Professional Beauty business to the investment firm -- and analysts at Kline commented on the news, stating, "KKR came out the winner...in one of the most competitive M&A battles in professional beauty history."

    Kline added, in a statement, 'If a deal had been reached by the end of 2019, the outcome likely would have been different.'

    According to the terms of the deal, KKR owns a majority stake in Coty’s Professional Beauty and Retail Hair Business, including the Wella, Clairol, OPI, and ghd brands, at a contemplated enterprise value of $4.3 billion.

    Update: The deal with KKR is now official - and Coty Names New CEO

    Coty will retain the remaining 40% interest in the business, which is number two in the salon hair care industry behind world leader L’Oréal, along with OPI professional nail care, the number one global professional nail care brand (based on Kline’s Salon Hair Care and Professional Nail Care global studies).

    Henkel was a top contender for the business, for the second time, Kline says. The company lost it to Coty in 2015 when Procter & Gamble sold the business. 

    The Professional Beauty Business Takes A Hard Hit During Covid-19

    Kline states, "With COVID-19 raging across the globe in earnest in early 2020, the professional beauty business has been among the hardest hit, with salon shutdowns bringing this high-touch service industry to a virtual halt."

    In the United States alone, Kline estimates that salon hair service revenues dropped by over $5 billion in Q1 alone (based on Kline’s Impact of COVID-19 on the Salon Hair Care Market).

    "This has had a direct and immediate impact on Henkel, Coty, and many others, with industry revenues headed for a steep decline in 2020 and a long road ahead for recovery," Kline's analysts say. 

    Due to this, "Henkel’s position as a strategic buyer weakened," Kline states, giving KKR the upper hand. 

    While KKR will face challenges ahead with the Coty Professional Beauty business, Kline believes that the company will be able to adapt and focus its resources based on the changes in hair and nail salons, along with variations in consumer behavior.

    Wella's hair color is distributed to independent hair stylists through Sally Beauty in the U.S. -- and Kline expects there to be more self-employed stylists in the future, due to our "new reality," during, and after the Covid-19 crisis. See Kline's beauty report, Independent Stylists: Global Market Brief.

    Kline also expects the OPI professional nail care brand to seek greater retail and online sell-through, as nail salon businesses are likely to suffer the greatest closure casualties in professional beauty.

    Kline's Worst-Case Global Forecast for Professional Beauty 

    Kline’s worst-case global forecast for professional beauty indicates the market will dip to $20 billion by 2024, contracting by approximately $5 billion from the $25 billion it registered in 2019. 

    "We thus expect KKR will retain its ownership of Coty Professional Beauty throughout this period, perhaps selling it to Henkel at some point in the future," analysts at Kline state.

    The company adds, "The next 12 to 18 months are critical for world health and the economy, with the health of the professional beauty business tied to this recovery."

    Read More

    Forbes Boots Kylie From Billionaires List: Did Coty over-pay for Kylie Cosmetics?


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