Coty Completes Merger with P&G Specialty Beauty Business

Merger Transforms Coty into One of the World’s Leading Beauty
Companies with a
Mission to be a Challenger in the Beauty Industry

Camillo Pane Officially Becomes CEO

NEW YORK–(BUSINESS WIRE)–Coty Inc. (NYSE: COTY) announced today that it has completed the merger
of The Procter & Gamble Company’s fine fragrance, color cosmetics, salon
professional and hair color and certain styling businesses (“P&G
Specialty Beauty Business”) into Coty. Coty is now the third-largest
beauty company in the world, with approximately $9 billion in revenue.
As a combined company, Coty will also hold the number one position in
fragrances, and number two and three positions in salon hair and color
cosmetics, respectively.

As previously announced, following the completion of the merger, Camillo
Pane became the new Chief Executive Officer of Coty. Commenting, Pane
said, “It is my great privilege to take over the reins of leadership at
such a transformational moment. Today marks a new chapter in Coty’s rich
heritage. With this merger, we have brought together a powerful
portfolio of much loved beauty brands and some of the world’s most
talented people in beauty and consumer goods. I believe this
combination, together with our distinctive entrepreneurial culture,
focused and lean operating structure, and efficient earnings model, will
enable Coty to be a challenger in the beauty industry. We aim to
relentlessly pursue superior products and solutions, build brands that
inspire and enable consumers to celebrate and liberate their own
individual beauty.”

Bart Becht, Chairman of Coty’s Board of Directors, said, “Coty is now
better positioned as we aim to become, over time, a global industry
leader by being a clear challenger in beauty, delighting our consumers
and creating long term shareholder value. I am confident that we now
have a much improved team, structure and culture to make the vision of
this merger a reality. I look forward to continuing to work with the new
leadership team in my role as Chairman to drive Coty to in-market
success and profitable growth.”

Consumer-Centric Organizational Structure, with Iconic Brands

Coty is organized into three divisions: Coty Consumer Beauty, Coty
Luxury and Coty Professional Beauty, each focused on their respective
categories and channels, with a lean structure that enables faster
decision making, focused investments and better communication with
customers and consumers.

Coty Consumer Beauty is focused on color cosmetics, retail hair coloring
and styling products, body care and mass fragrances, with the intent of
providing consumers with innovative products primarily in the mass
retail channel. Its iconic brand portfolio includes Adidas, Bourjois,
Clairol, COVERGIRL, David Beckham, Katy Perry, Max Factor, Rimmel, Sally
Hansen and Wella.

Coty Luxury is focused on expanding Coty’s leadership position in
prestige fragrances and emerging position in skincare, in the Luxury
Beauty market across all regions and luxury channels, including travel
retail. Its fragrances include such well-known brands as Marc Jacobs,
Calvin Klein, Chloé, Gucci, Hugo Boss, Balenciaga, Bottega Veneta,
Alexander McQueen, Davidoff and Miu Miu, amongst others, and skincare
brands include Lancaster and philosophy.

Coty Professional Beauty is focused on servicing salon owners and
professionals in both hair and nail care, covering all key salon
segments and salon client needs. The professional-focused brands include
Clairol Professional, Nioxin, OPI, Sebastian Professional, System
Professional and Wella Professionals.

Financial Benefits of Transaction

Coty aims to achieve a best-in-class profit margin and cash flow
conversion model in an industry with attractive growth dynamics and
modest private label penetration. Coty expects to achieve total cost
savings of approximately $7501, million or 16%1 of
acquired revenues, through the transaction composed of: initial
synergies, reflecting P&G costs that will not transfer, of approximately
$350 million; and incremental cost synergies, to be recognized over four
years, of approximately $400 million, achieved through a range of
efficiency opportunities that the combination of the two businesses
create.

The merger synergies are expected to enhance Coty’s already strong
margins, cash flow generation and earnings power. Including anticipated
synergies, Coty expects the P&G Specialty Beauty Business merger to:

  • Add approximately 500 to 600 basis points to Coty’s stand-alone
    adjusted operating profit margins over a four-year period, resulting
    in margins of approximately 19.6% which would make Coty a margin
    leader relative to its Beauty peers.
  • Drive a pro forma increase to Coty’s fiscal year 2016 adjusted
    earnings per share base of approximately $0.48, including the assumed
    four year implementation of full run-rate synergies.
  • Generate close to $1 billion in free cash flow by year two.

Financing

At the close of the transaction, Coty will assume approximately $1.9
billion of debt of the P&G Specialty Beauty Business. On a combined
basis, the business at close is expected to have moderate pro forma debt
leverage of approximately 3.5x net debt / Adjusted EBITDA, providing
ample cash flow for the enhanced annual dividend of $0.50 per share,
while preserving strategic flexibility.

Outlook for Fiscal 2017

As previously communicated, Coty anticipates that the first half revenue
trend will be below prior year results and the results for the combined
company, as Coty continues to make strategic choices to build a better
business, including rationalizing wholesale distribution, and as
resources which normally work on the business have been working on
closing the transaction and the future of the combined company. Coty
remains committed to return the Coty business back to growth in the
second six month period and is targeting to strengthen Coty’s growth
rate in the following fiscal years.

Coty Heritage

Coty has a unique and long standing heritage of entrepreneurs, upon
which the culture of the new Coty is being modeled. François Coty
started his fragrance business more than 100 years ago by making perfume
accessible to the general public for the first time and creating the
modern fragrance category. Eugene Rimmel brought the world the first
non-toxic mascara, Max Factor coined the term “make-up,” Sally Hansen
pioneered nail care and Wella was the first professional hairdressing
company. All of these entrepreneurs will form the inspiration for the
new Coty company to bring new innovative beauty products to consumers
and drive shareholder value over time.

Advisors

Morgan Stanley & Co. LLC served as lead financial advisor to Coty.
Barclays, J.P. Morgan and BofA Merrill Lynch also acted as financial
advisors, with Skadden, Arps, Slate, Meagher & Flom LLP serving as legal
counsel, McDermott Will & Emery LLP serving as tax and U.S. antitrust
counsel and Freshfields Bruckhaus Deringer serving as non-U.S. antitrust
counsel.

—//—

Note to editors – About Camillo Pane:

Camillo Pane is a global consumer goods veteran and a proven leader with
a strong track record for delivering business performance. Prior to
joining Coty, Camillo Pane spent 20 years with RB (Reckitt Benckiser)
plc, most recently as head of its global health and personal care
business. He played a key role in RB’s large-scale move into consumer
health, which became RB’s fastest-growing division. His career in
marketing and general management has covered both developed and
developing markets, including Italy, the United States, Brazil and the
UK. He has extensive experience in integration of acquisitions across a
wide range of geographies. Since joining Coty in July 2015, he has been
leading the development of Coty’s portfolio, category and brand
strategies, as well as the development of its beauty brand equities and
associated innovation pipeline.

About Coty Inc.

Coty is one of the world’s largest beauty companies with approximately
$9 billion in revenue, with a purpose to celebrate and liberate the
diversity of consumers’ beauty. Its strong entrepreneurial heritage has
created an iconic portfolio of leading beauty brands. Coty is the global
leader in fragrance, a strong number two in professional salon hair
color & styling, and number three in color cosmetics. Coty operates
three divisions – Coty Consumer Beauty, which is focused on color
cosmetics, retail hair coloring and styling products, body care and mass
fragrances sold primarily in the mass retail channels with brands such
as COVERGIRL, Max Factor and Rimmel; Coty Luxury, which is focused on
prestige fragrances and skincare with brands such as Calvin Klein, Marc
Jacobs, Hugo Boss, Gucci and philosophy; and Coty Professional Beauty,
which is focused on servicing salon owners and professionals in both
hair and nail, with brands such as Wella Professionals, Sebastian
Professional and OPI. Coty has over 20,000 colleagues globally and its
products are sold in over 130 countries.

Coty and its brands are committed to a range of social causes as well as
seek to minimize its impact on the environment.

Forward-Looking Statements

Certain statements in this release are forward-looking statements. These
forward-looking statements reflect Coty’s current views with respect to,
among other things, its future operations and financial performance; new
brand and business partnerships; expected growth; its ability to support
its planned business operation on a near- and long-term basis and its
outlook for the full year fiscal 2016. These forward-looking statements
are generally identified by words or phrases, such as “anticipate”,
“estimate”, “plan”, “project”, “expect”, “believe”, “intend”, “foresee”,
“forecast”, “will”, “may”, “should”, “outlook”, “continue”, “target”,
“committed,” “aim” and similar words or phrases. Reported results should
not be considered an indication of future performance, and actual
results may differ materially from the results predicted due to risks
and uncertainties including:

  • Coty’s ability to realize the cost savings, improved profit margins,
    adjusted EPS accretion, additional free cash flow and other financial
    benefits of the transaction with P&G Beauty Brands;
  • Coty’s ability to achieve its global business strategy and compete
    effectively in the beauty industry;
  • Coty’s ability to anticipate, gauge and respond to market trends and
    consumer preferences, which may change rapidly, and market acceptance
    of new products;
  • Coty’s ability to identify suitable acquisition targets and
    managerial, integration, operational and financial risks associated
    with those acquisitions, including its acquisitions of Bourjois,
    Beamly and the Brazil Acquisition and the transaction with P&G Beauty
    Brands;
  • Coty’s ability to implement the Organizational Redesign restructuring
    program as planned and the success of the program in delivering
    anticipated improvements and efficiencies;
  • risks related to Coty’s international operations, including
    reputational, regulatory, economic and foreign political risks, such
    as the political instability in Eastern Europe and the Middle East,
    the debt crisis and economic environment in Europe and fluctuations in
    currency exchange rates;
  • dependence on certain licenses, entities performing outsourced
    functions and third-party suppliers;
  • Coty’s and its brand partners’ and licensors’ ability to obtain,
    maintain and protect the intellectual property rights used in Coty’s
    products and Coty’s and its brand partners’ abilities to protect their
    respective reputations;
  • the ability and willingness of Coty’s business partners to deliver
    under Coty’s agreements with them;
  • administrative, development or other difficulties in meeting the
    expected timing of market expansions, product launches and marketing
    efforts;
  • impairments to Coty’s goodwill and other assets;
  • global political and/or economic uncertainties or disruptions,
    including a general economic downturn, a sudden disruption in business
    conditions affecting consumer purchases of Coty’s products and
    volatility in the financial markets;
  • Coty’s ability to manage seasonal variability;
  • consolidation among retailers, shifts in consumers’ preferred
    distribution channels, and other changes in the retail environment in
    which Coty sells its products;
  • disruptions in operations;
  • increasing dependency on information technology and Coty’s ability to
    protect against service interruptions, data corruption, cyber-based
    attacks or network security breaches;
  • changes in laws, regulations and policies that affect Coty’s business
    or products; and
  • the illegal distribution and sale by third parties of counterfeit
    versions of Coty’s products.

More information about potential risks and uncertainties that could
affect Coty’s business and financial results is included under “Risk
Factors” and “Management Discussion and Analysis of Financial Condition
and Results of Operations” in Coty’s Annual Report on Form 10-K for the
fiscal year ended June 30, 2016, and under “Cautionary Statement on
Forward-Looking Statements”, “Risk Factors” and “Management’s Discussion
and Analysis of Financial Condition and Results of Operations of P&G
Beauty Brands” in Coty’s Registration Statement on Form S-4 filed on
April 22, 2016, including any amendments thereto, and other periodic
reports Coty may file with the Securities and Exchange Commission from
time to time.

Coty assumes no responsibility to update forward-looking statements made
herein or otherwise, except as required by law.

Non-GAAP Measures

In this document, Coty presents adjusted operating profit margin,
adjusted earnings per share and free cash flow, which are non-GAAP
financial measures that we believe better enable management and
investors to analyze and compare the underlying business results from
period to period. These non-GAAP financial measures should not be
considered in isolation, or as a substitute for, or superior to,
financial measures calculated in accordance with GAAP. Coty does not
provide reconciliations of such forward-looking non-GAAP financial
measures to GAAP due to the inherent difficulty in forecasting and
quantifying certain amounts that are necessary for such reconciliation,
including adjustments that could be made for restructuring, integration
and acquisition-related expenses, amortization expenses, adjustments to
inventory, and other charges reflected in our reconciliation of historic
numbers, the amount of which, based on historical experience, could be
significant.

1 Potential cost savings and percentage of acquired revenues
in constant currency

Contacts

Investor Relations
Kevin Monaco, 212-389-6815
or
Media
Jennifer
Friedman, 917-754-8399
Jennifer_Friedman@cotyinc.com