McDermott Tax, Antitrust Teams Handle Back-to-Back, Multi-Billion Dollar Beauty/Coffee Mergers

McDermott Tax, Antitrust Teams Handle Back-to-Back, Multi-Billion Dollar Beauty/Coffee Mergers

Firm advises on combination of Coty-P&G beauty business in $12.5 billion “reverse Morris Trust” transaction; tax group also advises in global joint venture combining coffee businesses of D.E. Master Blenders 1753 and Mondelez International to create world’s largest pure-play coffee company

We’d like to spotlight two major tax-driven consumer industry mergers handled by McDermott Will & Emery this past week – one in the beauty aisle, the other in the coffee section. Both deals showcase the increasingly central role that sophisticated tax analysis plays in M&A.

In a deal announced on July 9, McDermott is representing venerable fragrance and cosmetic brand Coty Inc. in obtaining most of Procter & Gamble Co.’s global beauty business – part of P&G’s announced strategy to streamline its overall product lines.  The transaction has a reported value of $12.5 billion.

Coty gains a portfolio of 43 brands covering P&G’s professional and retail hair care, fragrance and color cosmetics lines – including such classic fragrance brands as Hugo Boss and Gucci, cosmetics lines COVERGIRL and Max Factor, and hair-coloring staples Wella and Clairol.

McDermott is advising Coty, which is majority-owned by JAB Holding Company, regarding the so-called reverse Morris Trust transaction – whereby the P&G assets are spun off in a separate company in a tax-efficient manner, and then the new company merges with a subsidiary of Coty.  Historical Coty shareholders will own 48% of the merged company on a fully diluted basis, with P&G shareholders owning 52%.

Here’s fuller detail on the deal from Coty:

McDermott’s deal team was led by Lowell Yoder, head of the firm’s US and International Tax practice, along with tax partner Timothy Shuman, plus tax partners‎ Barry Quirke and Philip Levine, and associate John Robert.Additionally, McDermott Antitrust lawyers Joe Winterscheid, Will Diaz, Greg Heltzer and Karl Herrmann advised on the deal.

The Coty deal comes on the heels of another large corporate combination closed this past week handled by McDermott’s tax group. McDermott advised in the merger of the coffee businesses of D.E. Master Blenders 1753, also majority-owned by JAB, and Mondelez International. A JAB-led investor group acquired D.E. Master Blenders 1753 in 2013 for approximately $9.8 billion.

The new entity – Netherlands-based Jacobs Douwe Egberts – becomes the world’s largest pure-play coffee company, whose brands include Jacobs, Douwe Egberts, L’Or, Gevalia, Tassimo, Moconna, Kenco and others. Mondelez received a 44% interest in JDE and €3.8 billion in cash in the transaction, while D.E. Master Blenders received 56% of JDE.

McDermott tax lawyers advised JAB – which also owns a majority interest in popular coffee brands Peet’s and Caribou – on all tax aspects of the transaction.

Here’s more on the coffee combination:

Messrs. Yoder and Shuman once again led the team, which also included Barry Quirke,David Noren, Neal White, Philip Levine,Michael Wilder, Jon Finkelstein, Martin Milner, Alan Schwartz, Caroline Ngo, Jeffrey Ekeberg and Britt Haxton.

Let us know if you want any further detail about either of these two tax-driven deals.

Juliet Di Frenza  212-262-7481
Allan Ripp 212-262-7477

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