British luxury brand Burberry to licence beauty business to Coty

Burberry Group plc today said that it would licence its beauty business to US cosmetics giant Coty Inc in a deal that will bring the UK's biggest luxury goods retailer around $225 million plus ongoing royalty payments.

Under the financial terms of the deal, Burberry will receive £130 million in cash in the second half of 2017-18 for the long-term exclusive global licence and related transfer of the beauty business, and £50 million for assets being transferred.

In 2015-16 Burberry's beauty business generated £203 million.

The exclusive licensing agreement will take effect from October 2017, subject to regulatory approvals.

The move comes just three months British media reported that Burberry had rejected multiple takeover offers from US handbag maker Coach Inc. (See: British luxury goods retailer Burberry rejects takeover offers from US handbag maker Coach)

"We are delighted to partner with Coty, a world leader in luxury fragrance and make-up.  Working with a global partner of their scale and expertise will help drive the next phase of Burberry Beauty's development and position this business for future growth, said, Christopher Bailey, chief creative and CEO of Burberry.

''Further, the combination of the upfront payments and ongoing royalties is financially attractive and is expected to provide an accretive impact to our earnings from FY 2018-19," he added.

"We are proud to welcome Burberry as a strategic partner of Coty.  We look forward to growing further Burberry's luxury beauty products using Coty's world-class expertise in developing and bringing to market beauty brands," said, Camillo Pane, CEO of Coty.

Burberry fashion house was founded in 1856 in Basingstoke in Hampshire, UK, by Thomas Burberry, at the time an apprentice draper.

As a specialist in outdoor sportswear, the designer quickly established a wealthy clientele who devoted themselves to hunting and fishing.

The company expanded rapidly and now has more than 500 stores in over 50 countries, including 7 in India, and has a market cap of $7.84 billion and no debt.

New York-based Coty is owned by Vienna-based Joh A Benckiser, the German holding company that manages the interests of the billionaire Reimann family, who also owns a substantial stake in Reckitt Benckiser, the world's largest maker of household cleaners.

With annual turnover of around $4.6 billion, Coty was founded in Paris in 1904 by François Coty, who is credited with founding the modern fragrance industry.

The 108-year old company develops and manufactures beauty care products that include fragrances, toiletries, colour cosmetics, skin care, sun care, and personal care products. Its Jennifer Lopez perfume has raked in $1 billion in sales since being introduced in 2002.

The Coty brand portfolio is distributed in prestige and ultra-prestige stores and includes Calvin Klein, Davidoff, Jennifer Lopez, Sarah Jessica Parker, Adidas, Beyoncé Knowles, Celine Dion, David and Victoria Beckham, Esprit, Pierre Cardin, Playboy, Shania Twain, Stetson, and Tonino Lamborghini among others.