While it’s difficult to keep up with the latest trends in cosmetics, that’s hardly been an issue for Coty, which has been alive and kicking for almost a century.
Now the company is looking for another important chapter in its long history: an initial public offering in the U.S. market.
In the global market for fragrances, Coty is ranked No. 2 among competing brands from Calvin Klein, adidas, Davidoff, Playboy and Sally Hansen.
Coty has also had lots of success with creating celebrity-based brands. This started with Jennifer Lopez’s Glow in 2002, and has continued with product lonches for Beyonce (Pulse) and Lady Gaga (Fame).
Distribution is diverse, as Coty offers cosmetic products at high-end luxury locations as well as mass-market chains like Walmart (WMT).
To boost its business, Coty also has been looking at acquisitions. About a year ago, the company even attempted to buy out Avon Products (AVP) for $10.7 billion, though Avon showed no interest. However, Coty did get something out of the effort — the vote of confidence from Berkshire Hathaway (BRK.B), which said it would help back such a deal at the time.
Coty certainly has the kinds of things Warren Buffett likes. The company has a strong moat — because of its brands and global infrastructure — and the financials are solid. From fiscal 2010 to 2012, revenues grew an average of 16% to $4.6 billion and adjusted operating income improved from $284.4 million to $535.9 million.
Going forward, a big focus will be on emerging markets — a key factor behind the attempted Avon deal, which would have provided a footprint in Asia and Latin America. So far, about 23% of revenues of Coty come from emerging markets, though the company wants to boost this to more than 33% within the next five years. Thus, the push for dealmaking should continue — and a public offering will allow Coty to use its stock as currency in any potential moves.
All in all, the timing of the Coty deal looks pretty good. The hard-charging market has driven Wall Street’s appetite for billion-dollar deals, as seen with recent IPOs including Norwegian Cruise Line (NCLH), SeaWorld Entertainment (SEAS), Quintiles (Q), ING (VOYA) and Zoetis (ZTS). Not to mention, Coty’s peers have performed quite well over the past year, with Avon, Elizabeth Arden (RDEN) and Estee Lauder (EL) charging 43%, 36% and 30%, respectively.
As for the IPO itself, Coty probably will hit the markets within the next couple weeks. The company plans to list on the New York Stock Exchange under the symbol “COTY,” and lead underwriters include Bank of America Merrill Lynch (BAC), JPMorgan (JPM) and Morgan Stanley (MS). The company plans to sell 65.7 million shares at a range of $16.50 to $18.50.
Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.