(Reuters) - German conglomerate JAB Holding Co laid out plans on Tuesday to increase its stake in Coty Inc to 60 percent, offering to buy out some of the cosmetics maker’s minority shareholders after a 50 percent slump in its market value in the past year.
JAB, already Coty’s largest shareholder with a 40 percent stake, said it would launch a partial tender offer to buy up to 150 million shares for $11.65 each in cash, just months after Coty appointed a chief executive and chairman who were associated with JAB.
The offer represents a premium of 20.6 percent, based on the stock’s closing price on Monday, pulling shares around 18 percent higher to $11.40 in trading before the opening bell.
Taking a majority stake would give JAB a firmer grip on a company that has been grappling with supply chain issues ranging from hurricanes and trucker strikes, as well as problems integrating brands it bought from Procter & Gamble three years ago.
“We understand that not all investors may share our long-term approach and we expect that shareholders will value the opportunity to obtain a significant premium for their shares,” JAB said in the letter.
A source familiar with JAB’s strategy said the proposed deal structure, which leaves Coty as a publicly listed company, would also allow Coty to continue to use its stock as currency to pay for any future acquisitions.
JAB, the private holding company of Germany’s Reimann family, has built a coffee empire over the past five years, seeking to take on market leader Nestle by buying packaged brands like JDE and coffee house chains like Peet’s Coffee.
Coty is one of its few remaining investments outside the coffee and hospitality industry.
JAB, which is doing the deal through JAB Cosmetics BV, said if all of the 150 million shares were purchased, the company would own about 60 percent of Coty.
JAB said it would not proceed with its offer unless Coty’s independent directors greenlight it. The offer gives them 10 business days to respond.
Reporting by Aishwarya Venugopal in Bengaluru and Greg Roumeliotis in New York; Editing by Saumyadeb Chakrabarty