Coty Shares Surge on $4 Billion KKR Investment That Includes Hair Care Brands, Convertible Stock Sale

Coty will spin off its Wella, Clairol, ghd brands into a standalone business, and sell convertible shares to KKR, in a deal that could be valued at $4 billion.

Coty (COTY) - Get Report shares surged Monday after the cosmetic goods maker unveiled a potential $4 billion investment from private equity giant KKR & Co.  (KKR) - Get Report.

Coty said KKR will inject at least $750 million into the group via the purchase of preferred equity, which can be converted into common shares at $6.24 each. KKR will also ultimately buy a majority 60% stake in its professional beauty and retail hair division, once it's carved out of the Coty group. The sale will value Wella at $4.3 billion on an enterprise basis, Coty said, and will be followed by a further $250 million purchase of convertible equity by KKR.  

“We are thrilled to enter into this strategic partnership with KKR, one of the world’s preeminent investment firms with an exemplary track record of value creation," said Coty chairman Peter Harf. "Their investment and partnership will be instrumental to strengthening Coty’s balance sheet and helping the company to achieve long-term growth in shareholder value.”  

Coty shares were marked 12.7% higher in pre-market trading Monday following news of the KKR investment to indicate an opening bell price of $5.86 each, a move that would trim the stock's year-to-date decline to around 48%.

Coty also posted a wider-than-expected adjusted loss of 8 cents per share for the three months ending in March, its fiscal third quarter, on revenues of $1.528 billion.