Coty buys into Kylie start-up to burnish Instagram appeal
● Coty is buying a controlling stake in Kylie Jenner’s cosmetics company for $600m (about R8.8bn) in a bet that the youngest Kardashian sister’s celebrity and social media savvy will help revive growth at its flagging beauty business.
Owned by investment company JAB Holdings, Coty will hold a 51% stake in Kylie Cosmetics once the deal closes.
For Jenner, selling a chunk of her four-year-old company at a rough valuation of $1.2bn cements her status as a mogul at the age of just 22. Earlier this year, Forbes magazine crowned her “the youngest self-made billionaire ever”.
The deal is another sign of how the beauty industry is changing in the social media era as celebrities such as Jenner and pop star Rihanna mint new brands seemingly overnight, appealing to younger consumers with little loyalty to old brand names.
“With a single social media post, Kylie is able to reach double the number of people who watch the Super Bowl every year, and she is the seventhmost followed person on Instagram,” says Coty CEO Pierre Laubies, who joined the company a year ago.
Companies including L’Oréal and Shiseido have been on acquisition sprees in a bid to remain relevant amid the boom in upstart brands. Also on
Monday, Estée Lauder said it would buy the twothirds of Korean skincare company Have & Be that it did not already own for $1.1bn.
Coty will take on additional borrowing to finance the acquisition, adding to its already heavy debt load of $7.4bn.
Coty expects the Jenner deal to add “more than 1%” to annual net revenue growth for its fragrance, cosmetics and skincare products over the next three years. Kylie Cosmetics is on track to reach $200m in sales this year, growing at about 40% annually.
The Jenner move is also a sign that Coty’s new management and its backers at JAB are not afraid of embarking on additional acquisitions, despite the company’s track record of destroying value with such moves. It was forced to write down a quarter of the $12bn value of its 2015 acquisition of Procter & Gamble’s beauty brands, and recently sold off Younique, a social selling platform for makeup, for $78m about two years after paying $600m for it.
Coty is in the midst of a restructuring effort after several torrid years marked by management changes, supply chain mishaps and market share losses. It recently put its hair-care and professional beauty businesses up for sale, which account for nearly a third of its $8.6bn annual revenue.
Deal puts $1.2bn valuation on makeup business