London/Frankfurt: Consumer goods giants Unilever and Henkel and a series of buyout funds, including Advent and Cinven, are talking to US cosmetics maker Coty to submit bids for some of its most popular beauty brands, three sources told Reuters.
Coty, which has a market value of $9 billion and is majority owned by German conglomerate JAB Holdings, is expected to kick off an auction process in December to find a new owner for a portfolio of professional hair and nail care brands, the sources said, speaking on condition of anonymity.
The portfolio, which includes Wella, Clairol, GHD and OPI among others, is worth up to $7 billion and has drawn interest from both industry players and financial investors, they said.
Colgate-Palmolive Co is among a number of consumer companies looking at add-on deals to grow their skin care units, the sources said.
New York-based Colgate Palmolive recently bought the skin care unit of France’s Laboratoires Filorga Cosmétiques for 1.5 billion euros ($1.66 billion). The company is expected to enter the race for Coty’s brands, facing competition from rivals Unilever and Henkel as well as heavyweight investment funds.
The list of financial sponsors includes Advent, Blackstone, KKR, CVC Capital Partners and BC Partners.
One of the sources said Cinven was examining a possible joint bid for the brands.
Coty, Henkel, Colgate-Palmolive, Cinven, Advent, CVC and BC Partners declined to comment, while Unilever, Blackstone and KKR were not immediately available for comment.
Coty aims to complete the sale, which was announced last month, by the middle of 2020 and has hired Credit Suisse to handle discussions with bidders.
Bankers advising the prospective bidders estimate the portfolio could fetch 10 to 12 times its core earnings of roughly $600 million, giving it a valuation of $6 to $7 billion, the sources said.
Coty’s professional beauty unit, which primarily sells hair and nail care products to salons, accounts for about 21 per cent of its total revenue, with annual sales of about $1.81 billion.
The unit, however, has seen falling sales in the last four quarters.
Coty also owns other cosmetic brands such as Rimmel and Max Factor as well as skin care firms Lancaster and Philosophy....