The company is a major player in the Brazil market – the third biggest in the world – thanks to a combination of brands that have significant footing in the color cosmetics, hair care, body care, deodorant and men’s grooming categories.
In 2014 the company’s total revenues amounted to $253.5m (R$977.5 million), while the company is paying approximately $1.0bn (R$3.8 billion) in cash for the acquisition, which will be funded through a combination of existing cash assets and available credit facilities.
The transaction will be subject to regulatory clearance, but if there are no problems the deal is expected to be sealed by March 2016.
Currently the most significant brands that will form a part of the acquired business portfolio include:
- Monange – a multi-category personal care brand (body care, hair care, female deodorant)
- Risqué – the market leader in nail polish in Brazil
- Bozzano – the market leader in men’s care in Brazil
- Paixão – largest skin care brand in Brazil
- Biocolor – a best-selling hair colorant in Brazil
The acquisition also includes a huge manufacturing and distribution center in Goias state, which is strategically placed in the heart of the country, and will provide the critical mass capabilities for Coty to establish firmer footing in Brazil.
Is the timing right?
The deal comes at crossroads in the development of the Brazilian economy as it officially went into a recession on the back of higher taxed implemented to make up for massive debts during the course of this year.
ABHIPEC, the Brazilian beauty care association, has already said that sales of beauty and personal care products should fall by approximately 5% for the current quarter, and that the decline should hit double digits during the course of 2016.
Coty already has a small business operating in the country, but is also expected to amass a much larger business as a result of the Procter & Gamble business it acquired in the summer, which includes over 40 global cosmetic and fragrance brands bought at an estimated cost of $12.5bn.
Coty evolves as a cosmetic powerhouse
The P&G brands are expected to be integrated into the Coty business during the second half of 2016, if regulatory clearance is confirmed.
“We expect that the strength of the brands, the impressive leadership team and its robust infrastructure will enhance Coty’s competitive position and very much complement our contemplated merger with the P&G Specialty Beauty Business,” said Coty interim CEO Bart Brecht.
“Today’s announcement is another step in our progression towards creating a pure-play global leader and challenger in Beauty.”