What happened
Just two sessions after Coty (COTY +0.23%) stock jumped on a better-than-expected earnings report, shares of the cosmetics maker were rallying again today after JAB Holding Company, a European private investment firm that is best known for controlling food and beverage companies like Keurig Dr Pepper, Panera Bread, and Krispy Kreme, said it sought to take majority control of Coty with a tender offer for 150 million shares at $11.65.
That news pushed Coty shares up 14.5% to $11.06 as of 11:55 a.m. EST.
Image source: Coty.
So what
JAB already owns 40% of Coty and said it wished up that stake to 60% through the tender offer. At $11.65, the price marks a 21% premium over yesterday's closing price, and a 38% premium to the 90-day moving average.
In its letter to Coty, JAB explained that it had been an investor in Coty for almost three decades and planned to remain invested. It also cheered the recent management changes at Coty, adding, "We believe that the Company has the potential to address its challenges and prosper over the long-term."
Coty has not yet responded to the letter, and JAB said it would await a reply from the board of directors.
Check out the latest Coty earnings call transcript.
Now what
JAB's offer wouldn't take Coty private as the stock would continue to be traded. However, taking a majority stake would give the company the power to remake the board as it chooses to or shake up management, though it seems to be pleased with the current team leading the cosmetics company. The stock could easily rise to $11.65 from here if Coty approves the offer, but the stock is likely to remain volatile as investors await a decision and the company's turnaround continues to play out after last week's solid report.
