CINCINNATI -- Procter & Gamble's split from 41 beauty brands is nearing completion as the consumer giant wraps up an exchange offer this week.
Unknown until just before the closing of the deal: the exact structure of P&G’s split with its beauty brands. The final structure of the deal will shape Procter’s financial position and will influence future moves by the Cincinnati-based consumer product giant’s from potential acquisitions to a boost in dividends.
Cincinnati-based P&G is asking existing shareholders to swap some or all of their shares for stock in the new-and-improved Coty. P&G officials won’t say how many have expressed interest. P&G says it will distribute any unsold shares in the departing beauty brands to all P&G shareholders.
With the closing of the beauty divestiture, P&G will complete its massive brand divestiture announced two years ago aimed at paring 100 noncore labels. When the deal is done, P&G executives have promised their company will be smaller, easier-to-run and poised to resume growing sales and profits.
Jack Russo, an analyst with Edward Jones, said the transaction will benefit both P&G, which wants to get smaller, and Coty, which wants to bulk up.
"For P&G, this allows them to get rid of underperforming brands and focus their capital and resources on the best brands within their beauty business," Russo said. "Meanwhile, Coty will be able to meaningfully improve the size and scale of its beauty business with this deal."
Bill Chappell, an analyst with SunTrust, said completion of the complex deal will allow P&G to get back to basics, which it has promised to do for the last two years.
"Shareholders will be happy to see them reach the finish line, so they can focus on their core business," Chappell said. "P&G won't know if their plan will work until they get past this transaction."
