Item 1.01 Entry Into a Material Definitive Agreement.
On June 1, 2020, Coty Inc. (NYSE: COTY) (the "Company" or "Coty") entered into
definitive agreements with Coty International Holding B.V., a private limited
liability company organized under the laws of the Netherlands ("Coty
International"), and Rainbow UK Bidco Limited, a private limited company
incorporated under the laws of England and Wales ("Purchaser") and an affiliate
of funds and/or separately managed accounts advised and/or managed by Kohlberg
Kravis Roberts & Co. L.P. and its affiliates, regarding the acquisition of Waves
UK Divestco Limited, a private limited company incorporated under the laws of
England and Wales and an indirect subsidiary of Coty International ("Newco"),
pursuant to which and subject to the terms and conditions therein, (1) the
Company will transfer its Professional Beauty (including Professional Hair, OPI
and ghd) and Retail Hair businesses, which for the avoidance of doubt shall
include the professional and Wella retail hair businesses in Brazil but exclude
the Brazilian consumer beauty business (the "Professional Beauty Business") to
Newco (the "Separation") and (2) following the Separation, the Company shall
directly or indirectly, sell all of the ordinary shares, par value $0.01, of
Newco (the "Newco Shares") to Purchaser (the "Sale" and together with the
Separation, the "Transactions") for a combination of cash and stock in
Purchaser's parent company, Rainbow JVCo Limited, a company incorporated under
the laws of Jersey ("JVCo"). Following the Sale, Purchaser will hold
approximately 60% of the ordinary shares of JVCo (the "JVCo Shares") and the
Company will, directly or indirectly, hold approximately 40% of the JVCo Shares.
Separation Agreement
On June 1, 2020, the Company, Coty International, Newco and Purchaser entered
into a Separation Agreement (the "Separation Agreement"). The Separation
Agreement sets forth the terms and conditions on which the Professional Beauty
Business will be separated from Coty and its subsidiaries (the "Coty Group").
Pursuant to the terms and subject to the conditions set forth in the Separation
Agreement, the Professional Beauty Business will be separated from the Coty
Group by way of the transfer to Newco of certain entities that either:
(i) currently conduct the Professional Beauty Business; or (ii) will, prior to
completion of the Sale ("Completion"), acquire the local Professional Beauty
Business of another member of the Coty Group.
The Separation Agreement also sets forth the terms of the aforementioned
transfers, including the obligations of the parties in connection with those
transfers, including to seek consents of third parties where applicable. The
Separation Agreement provides for the establishment of transitional
arrangements, including transitional arrangements pursuant to which the Coty
Group members may continue to act as the transacting entities for the
Professional Beauty Business, for a period not to exceed 24 months following
Completion, subject to extension for a period of up to three months for certain
transitional arrangements.
Subject to the terms and conditions of the Separation Agreement, all of the
assets and liabilities of the Coty Group other than the assets and liabilities
of the Professional Beauty Business will be retained by or transferred to Coty
or a member of the Coty Group.
Pursuant to the terms and subject to the conditions set forth in the Separation
Agreement, the parties agreed to establish a separation committee (the
"Separation Committee") to oversee the Separation. The Separation Committee is
formed of two members, one appointed by each of Coty International and
Purchaser. Decisions of the Separation Committee are made on a unanimous basis,
subject to an escalation procedure in the event that the Separation Committee is
unable to reach unanimous agreement on a matter within 10 business days of first
considering the relevant matter.
The Separation Agreement governs certain aspects of the relationship between the
Company, Coty International, Newco and Purchaser after Completion, including
provisions with respect to release of claims, indemnification, access to
financial and other information and access to and the provision of records.
Following Completion, the parties will have mutual ongoing indemnification
obligations with respect to certain liabilities related to the Professional
Beauty Business and the Coty Group's remaining business, respectively.
The foregoing description of the Separation Agreement and the transactions
contemplated thereby, does not purport to be complete and is subject to, and
qualified in its entirety by reference to, the full text of the Separation
Agreement, which is attached as Exhibit 2.1 to this Current Report on Form 8-K
and is incorporated herein by reference.
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Sale and Purchase Agreement
On June 1, 2020, the Company entered into a Sale and Purchase Agreement with
Coty International and Purchaser (the "Purchase Agreement"). Pursuant to the
terms and subject to the conditions set forth in the Purchase Agreement, Coty
International will sell to Purchaser a 100% interest in the Company's
Professional Beauty Business with the acquisition to be effected through the
purchase of all of the Newco Shares, for an enterprise value of $4.3 billion on
a debt free, cash free basis. The purchase price will be subject to customary
post-Completion adjustments for working capital, cash and indebtedness.
The Company and Coty International make certain customary warranties and
covenants in the Purchase Agreement, including, among other things, covenants by
the Company not to take certain actions prior to Completion without the prior
approval of Purchaser, and shall consult with the Purchaser prior to taking any
material steps in response to COVID-19. Further, the Company guarantees the
performance of the obligations of Coty International under the Purchase
Agreement on the terms set forth therein.
Each party's obligation to consummate the transactions contemplated under the
Purchase Agreement is subject to certain conditions specified therein, including
(i) approval by the European Commission under applicable European merger control
regulations; (ii) approval or termination of any applicable waiting period
pursuant to the competition laws in certain additional countries; (iii) approval
by the Treasurer of the Commonwealth of Australia under applicable Australian
foreign investment laws; and (iv) delivery of the separation notice to Purchaser
in accordance with the Separation Agreement.
The foregoing description of the Purchase Agreement and the transactions
contemplated thereby, does not purport to be complete and is subject to, and
qualified in its entirety by reference to, the full text of the Purchase
Agreement, which is attached as Exhibit 2.2 to this Current Report on Form 8-K
and is incorporated herein by reference.
The Separation Agreement and the Purchase Agreement have been included to
provide investors with information regarding their terms. They are not intended
to provide any other factual information about Coty, Purchaser, JVCo or Newco.
The representations, warranties, covenants and agreements contained in the
. . .
Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain
Officers.
Appointment of Chief Executive Officer
On May 31, 2020, the Board appointed Peter Harf, age 74, to the position of
Chairman and Chief Executive Officer of the Company, effective immediately.
Mr. Harf will serve in such position until he resigns or is terminated or
replaced by a duly authorized action of the Board. Other than the continued
vesting of outstanding equity awards previously granted to Mr. Harf, Mr. Harf
will not receive any compensation in any form from the Company for serving as
Chairman of the Board or for serving as Chief Executive Officer of the Company.
Resignation of Chief Executive Officer
On February 27, 2020, Pierre Denis was appointed by the Board to become the
Chief Executive Officer of the Company, effective on June 1, 2020. Mr. Denis has
agreed, in connection with the Sale and the new management structure announced
by the Company, that he will not become the Chief Executive Officer of the
Company and instead will remain a senior advisor to the Company through June 30,
2021 (the "Termination Date"). In connection with his resignation and advisory
services arrangement, Mr. Denis and the Company agreed to enter into an
amendment and settlement agreement (the "Settlement Agreement"), a copy of which
will be filed as an exhibit to the Company's Annual Report on Form 10-K for the
period ended June 30, 2020. Under the terms of the Settlement Agreement, in
exchange for his advisory services, Mr. Denis will continue to receive payment
of his annual base salary at the rate of $1,200,000 and on June 5, 2020, he will
receive a number of shares of Class A Common Stock equal to the quotient
obtained by dividing (x) $4,000,000 by (y) the 30-day trailing average of the
Class A Common Stock for the thirty consecutive trading days
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that precede June 5, 2020. The shares of Class A Common Stock will be restricted
from sale by Mr. Denis for a period of twelve (12) months from the date of grant
(other than with respect to such number of shares with an aggregate value equal
to any applicable tax withholding obligations due by Mr. Denis in connection
with the grant). During the period in which he provides advisory services,
Mr. Denis will not be entitled to participate in the Company's annual bonus plan
or receive any of the equity grants described in the Company's Current Report on
Form 8-K, dated February 27, 2020. The Settlement Agreement further provides
that on the Termination Date, Mr. Denis shall receive, subject to his ongoing
compliance with all of the obligations set forth in such agreement, a cash
payment equal to $1,200,000.
Compensation of Chief Operating Officer
On May 31, 2020, the Board approved a grant of 692,952 shares of restricted
Class A common stock to Pierre-André Terisse, the Company's Chief Operating
Officer and Chief Financial Officer. The restricted stock will be granted on
June 5, 2020 and will vest in three equal annual installments subject to
Mr. Terisse's continued employment through each such vesting date and will be in
lieu of his participation in the Company's other incentive compensation
programs. In addition, effective June 1, 2020, Mr. Terisse's annual base salary
will be $1,400,000.
Transaction Restricted Stock Unit Grant
Contingent upon the successful entry into the definitive agreement for the
Transactions described in this Current Report on Form 8-K, the Board approved an
additional grant to Mr. Terisse of restricted stock units settling in shares of
Class A Common Stock in an amount equal to the quotient obtained by dividing (x)
$5,000,000 by (y) the closing price of a share of Class A Common Stock on
June 5, 2020. The restricted stock units will vest subject to Mr. Terisse's
continued employment with respect to 60% of the units on the third anniversary
of the grant date, 20% on the fourth anniversary of the grant date and 20% on
the fifth anniversary of the grant date. If Mr. Terisse's employment is
terminated by the Company or an affiliate of the Company without cause, the
restricted stock units will vest in full upon the date of such termination.
Changes to the Board of Directors
On May 31, 2020, the Board appointed Johannes Huth as (i) Vice Chairman of the
Board and (ii) a member of the Remuneration and Nomination Committee (replacing
Peter Harf, who was appointed Chief Executive Officer on the same date), each
effective immediately. On that same day, the Board appointed Beatrice Ballini as
the chairperson of the Remuneration and Nomination Committee, replacing Erhard
Schoewel, effective immediately. Mr. Schoewel will remain a member of the
Remuneration and Nomination Committee. As of the date of this Current Report on
Form 8-K, the members of the Remuneration and Nomination Committee are Beatrice
Ballini (Chair), Johannes Huth, Paul Michaels and Erhard Schoewel.
On May 31, 2020, the independent directors of the Board appointed Robert Singer
as Lead Independent Director, effective immediately.
On May 31, 2020, Mr. Denis resigned from his position as a member of the Board,
effective May 31, 2020. Mr. Denis' resignation did not result from any
disagreement with the Company on any matter relating to the Company's
operations, policies or practices.
On May 31, 2020, Pierre Laubies, the current Chief Executive Officer of the
Company, also resigned from his position as a member of the Board, effective
May 31, 2020, in connection with his stepping down from the position of Chief
Executive Officer effective June 1, 2020 as previously disclosed. Mr. Laubies'
resignation did not result from any disagreement with the Company on any matter
relating to the Company's operations, policies, or practices.
Item 8.01 Other Events.
On June 1, 2020, the Company issued a press release (the "Press Release")
announcing the execution of the Purchase Agreement and new management
organization. A copy of the press release is furnished herewith as Exhibit 99.1
to this Current Report on Form 8-K.
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Exhibit 99.1 shall not be deemed "filed" for purposes of Section 18 of the
Securities Exchange Act of 1934 (the Exchange Act) or otherwise subject to the
liabilities under that Section and shall not be deemed to be incorporated by
reference into any filing of the Registrant under the Securities Act of 1933 or
the Exchange Act.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
Exhibit
Number: Description
2.1 Separation Agreement, dated June 1, 2020, by and among Coty Inc.,
Coty International Holding, B.V., Waves UK Divestco Limited and
Rainbow UK Bidco Limited.
2.2 Sale and Purchase Agreement, dated June 1, 2020, by and among Coty
Inc., Coty International Holding, B.V. and Rainbow UK Bidco
Limited .
10.1 Amendment No. 1 to the Investment Agreement, dated June 1, 2020,
by and among Coty Inc. and KKR Rainbow Aggregator L.P.
99.1 Press Release, dated June 1, 2020.
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document).
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