COTY said on Tuesday it had agreed to return the Gucci Beauty license to Kering for about $400 million, ending the agreement about a year early as the US cosmetics group raises cash to cut debt and invest in core brands.
The New York-based company will use most of the proceeds to pay down debt, with some capital earmarked for investment in key brands including BOSS and Marc Jacobs, a person familiar with the matter said.
Shares of the CoverGirl owner were little changed in after-hours trading, but have lost more than 80 percent of their value since the start of 2024 as the company struggles with weak demand and competition in mass-market beauty during a leadership transition.
The agreement comes as Coty restructures its business to improve profitability after launching a strategic review of its consumer beauty division last September that could lead to the sale of brands including CoverGirl and Rimmel.
Coty will continue operating Gucci Beauty through at least June 30, 2027, under the terms of the deal. The original license was set to expire in 2028.
The transaction includes a $250 million upfront payment, $150 million due by Sept. 30, 2027, and up to $30 million in performance-based incentives designed to ensure a smooth transition.
The additional payment is intended to encourage a smooth transition, the person said, adding, "Kering is paying Coty to keep L'Oréal happy."
Coty will also sell existing Gucci Beauty inventory to Kering and expects to incur about $30 million in cash taxes from the deal.
The deal follows Kering's beauty deal with L'Oréal last year, which included rights to a long-term Gucci beauty license after Coty's existing contract expires.
In February, L'Oréal Chief Executive Nicolas Hieronimus confirmed discussions were underway between Kering and Coty and expressed interest in gaining access ahead of the 2028 expiry.
Analysts view Gucci fragrances as the crown jewel of Kering's beauty portfolio, with potential to mirror the strong growth L'Oréal achieved with Saint Laurent.
The Gucci license has been one of Coty's most valuable assets since the company acquired Procter & Gamble's beauty brands in 2016, with the brand's revenue growing more than 60 percent since 2019.
Under interim CEO Markus Strobel, Coty is streamlining its portfolio to strengthen its core brand strategy.
