Proctor & Gamble sheds 43 beauty brands for $12.5 billion

by The City Wire staff ([email protected]) 276 views 

Brand giant Proctor & Gamble has been working to streamline its products most recently selling 43 beauty brands to Coty in a $12.5 billion deal, announced Thursday July 9.

Euromonitor notes this deal gives Coty the world's No. 1 fragrance maker ranking ahead of L’Oreal. Some of the brands that Coty is acquiring in the P&G deal include: Dolce & Gabbana and Gucci.

Some of the top beauty brands moving to Coty include: CoverGirl, Wella and Vidal Sassoon hair-care, Miss Clairol and Lacoste and Max Factor. In all the deal affects 10,000 workers worldwide which is 8% of P&G’s workforce. It’s also 200 jobs in the company’s Cincinnati headquarters. The transaction is expected to close next year with the transfer ownership of eight factories and nine distribution centers, including three U.S. facilities.

This divestiture is the biggest sale under the leadership of CEO A.G.Lafley who first unveiled his plans to shed 100 brands in the summer 2014. His plan for P&G is to focus on 65 core brands which display the largest growth potential.

The deal will simplify P&G's nearly $20 billion beauty business that Lafley helped create: reducing it to roughly $14 billion in annual sales and leaving it much more focused on hair and skin care sold at mass retailers like Wal-Mart.

P&G's remaining beauty business will be anchored by Pantene and Head & Shoulders shampoos and Olay and SKII skin care brands that command more than $9 billion in annual sales.

Earlier this year P&G announced plans to sell off Duracell batteries to Warren Buffett's Berkshire Hathaway. Last year P&G sold lams and other pet foods businesses that grossed about $1.6 billion in annual sales.

P&G officials said the recent transaction marks the sale or exit to more than 90 brands.

"This represents a significant step forward in the work to focus our portfolio on 10 categories and 65 brands that best leverage P&G's core competencies," Lafley said Thursday.

P&G said it will either spin or split off the beauty brands in a transaction that will generate a $5 billion to $7 billion one-time gain with minimum tax impacts. The company plans to repurchase shares and step up dividend payments to turn the proceeds P&G indicated it will share the proceeds with stockholders by stepping up stock repurchases and dividend payments.

Coty and Proctor & Gamble operate large offices in Northwest Arkansas overseeing their businesses with Wal-Mart and Sam's Club.