PG Procter and Gamble Co

By Micah Maidenberg 

JAB Ltd. has offered to buy up to $1.75 billion of shares in Coty Inc., a move that would significantly increase the investment firm's stake in the embattled beauty giant.

JAB on Tuesday launched a tender offer to buy up to 150 million shares in Coty for $11.65 each in cash, a 21% premium to Monday's closing price. If successful, the purchase would boost JAB's stake in Coty, whose products include OPI nail polish and CoverGirl makeup, to 60% from 40%.

The move would allow JAB to regain official voting control over the company. It reduced its stake in Coty when it floated it on the stock market in 2013 at $17.50 a share. Coty's stock, down 53% over the past year, jumped 18% in premarket trading on the news.

JAB, which also owns Krispy Kreme, Dr Pepper and Peet's Coffee, has run Coty since buying the castoff perfume business from Pfizer Inc. in 1992. While JAB has become a consumer-goods powerhouse after a string of acquisitions, Coty's $12 billion purchase of more than 40 Procter & Gamble Co. beauty brands in 2016 has been problematic.

Since that deal, Coty's sales have slumped and the company has named a new chief executive and financial head. Its former chairman, a JAB senior partner, has also left both Coty and the investment firm.

Coty has said some of the former P&G brands were in worse condition than Coty anticipated when it agreed to buy them and suffered further as consumers shifted away from mass-market brands sold in drugstores.

"We believe that the company has the potential to address its challenges and prosper over the long term, and that the company's recent management changes are an important first step in addressing the company's recent performance," JAB said in a statement Tuesday.

JAB's offer to buy more shares is contingent on the recommendation of Coty's independent directors.

Jonathan Feeney, an analyst at Consumer Edge, raised his price target on Coty stock to $14 from $10 on the news, saying he expects the board to approve the deal and the full offer to be subscribed. The move, said Mr. Feeney, gives JAB more control to cut Coty's high expenses and "shows confidence from knowledgeable insiders in existing management's plans."

JAB's focus on Coty is a relative outlier for the company whose priorities have increasingly shifted toward food and drinks brands. Last year it agreed to pay $26 billion to buy Dr Pepper Snapple Group Inc., the No. 3 soft-drink company in the U.S. It also acquired British sandwich chain Pret A Manger Ltd. It already owns Peet's Coffee & Tea, Krispy Kreme doughnuts and Panera Bread Co., after a decadeslong acquisition spree. In late 2015, JAB took control of Keurig Green Mountain in a $13.9 billion deal that further expanded its coffee business.

--Micah Maidenberg contributed to this article.

Write to Micah Maidenberg at micah.maidenberg@wsj.com

(END) Dow Jones Newswires

February 12, 2019 09:23 ET (14:23 GMT)

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