KIM Kardashian Billionaire status on the way (coty buys $200m 20% stake in KKW)

KARAKNIGHT

Jun 29, 2020

edited

What's better than one billionaire?? Seems the West family has beaten the Carter's to the race for money royalty.

From the financial times:
ft.com/content/ee526fad-d70d-40c6-a848-f883e1b1d380?referrer=amp-unreadable

Article:

Cosmetics maker Coty has agreed to buy a 20 per cent stake in Kim Kardashian West’s make-up brand KKW for $200m, according to people with direct knowledge of the deal, expanding its collaboration with the celebrity family as its own sales flag.

The deal values the three-year-old company at $1bn, slightly less than the $1.2bn valuation Coty put on Ms Kardashian West’s younger sister Kylie Jenner’s business when it bought a 51 per cent stake last year.

But by buying only a minority stake in KKW this time, Coty has taken a more cautious approach given its heavy debts and a global recession caused by the Covid-19 pandemic.

Coty does have the option to later acquire a majority stake in KKW, said one of the people familiar with the deal terms. No details on KKW’s sales or profits were disclosed.

The KKW deal marks the latest step taken by Coty’s majority shareholder, JAB Holdings, to turn round the unprofitable cosmetics group whose shares have fallen 62 per cent this year.

The deal shows that fashion and beauty companies still see the Kardashian family, who rose to fame in 2007 with their reality TV show, as having the power to confer glamour on their often fading brands.

When rapper Kanye West, who is married to Kim Kardashian, announced that his fashion brand Yeezy had signed a 10-year deal with Gap last week, the shares in the retailer jumped nearly 20 per cent.

By bringing another big social media star into the fold, Coty is trying to modernise its own portfolio of make-up brands, which include mass-market stalwarts such as CoverGirl and Max Factor.

Kim Kardashian West has 177m followers on Instagram, and Kylie Jenner has 182m, while their respective make-up brands together have another 30m or so.

With the deals, Coty is also adopting a model of direct-to-consumer online sales, paired with aggressive Instagram marketing. The approach has been perfected by a number of new upstart cosmetics brands that have challenged industry leaders L’Oréal and Estee Lauder in recent years.

Kim Kardashian West’s company sells its lines of lipsticks, eyeshadows, foundations and powders mostly through its own website, giving it better margins than some bigger brands that rely on selling wholesale in department stores.

KKW is expected to soon expand into skincare products, which has become the fastest-growing segment of the cosmetics industry as women eschew heavily made-up looks for more natural ones.

Coty has been the laggard in JAB’s portfolio since the cosmetics group’s disastrous acquisition of Procter & Gamble’s beauty business in 2015. It has changed management four times in five years and embarked on a series of unsuccessful turnround plans.

Earlier this month, JAB took more direct control over Coty by appointing the holding company’s founder Peter Harf as its new chief executive.

Alongside that announcement, Coty agreed to spin out and sell a majority stake in its professional beauty division to private equity group KKR in a deal that valued the business at $4.3bn. Separately, KKR agreed to inject $1bn in convertible debt into Coty and to take two board seats at the group to help with the turnround efforts.

Both the Kylie Cosmetics and KKW deals came about through Mr Harf’s relationship with the Kardashian-Jenner family and in particular with matriarch Kris Jenner. Tiger Chark, a US-based boutique advisory firm, also worked on the two transactions for Coty, one person said.

Aside from Coty, JAB’s portfolio also includes Pret A Manger and Panera Bread as well as controlling stakes in publicly traded Keurig Dr Pepper and JDE Peet’s. The group was founded to manage the wealth of Germany’s billionaire Reimann family, but also raises funds from outside investors.