Burberry to sell beauty business to Coty as part of strategic partnership
Burberry Group
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Burberry has agreed to transfer its a strategic partnership for its beauty business with Coty in a deal that is expected to reap around $225m plus ongoing royalty payments.
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Burberry will sell the business licence and assets to Coty and then under the partnership will provide the creative input and the Franco-US company will use its "deep beauty industry expertise and first-class global distribution".
With the partnership beginning in October, Burberry expects a neutral effect on adjusted pre-ax profit this financial year and the benefit to flow from the 2018/19 fiscal period.
Coty will pay £130m for the long-term exclusive global licence and £50m for the beauty business assets and roughly £50m of gross assets which Burberry will transfer in the second half of the current year.
Burberry will use the cash proceeds for general corporate purposes and expects around £30m of one-off cash costs associated with the deal.
In the last published full year, Burberry took £203m of retail and wholesale revenue from the beauty business, the majority of which was wholesale.
Burberry chief creative and chief executive officer Christopher Bailey, who is due to be replaced as CEO by Marco Gobbetti in July, hailed Coty as a "world leader in luxury fragrance and make-up".
"Working with a global partner of their scale and expertise will help drive the next phase of Burberry Beauty's development and position this business for future growth. Further, the combination of the upfront payments and ongoing royalties is financially attractive and is expected to provide an accretive impact to our earnings from FY 2018/19," he said.