Coty to buy Chanel's Bourjois cosmetics brand in shares

PARIS, France - US cosmetics group Coty said on Tuesday it had made a binding offer to buy French make-up brand Bourjois from Chanel and give the family-owned French luxury company a stake in Coty worth an estimated $240 million.

The deal would mean Chanel, the world's second-biggest luxury brand behind LVMH's Louis Vuitton, would get a stake in Coty of around 4.2 percent, according to Reuters data.

The transaction comes just over a week after Coty's chief executive, Michele Scannavini, stepped down for personal reasons, sending the company's shares down as much as 3 percent.

Coty is still more than 70-percent owned by Joh. A. Benckiser, the investment holding company of the Reimanns, the German billionaire family associated with Reckitt Benckiser, the cleaning and household products maker.

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The flotation of Coty netted nearly $800 million for JAB which is hoping next week to sell 25 percent of Jimmy Choo on the London Stock Exchange in a deal that could value the high-end shoemaker at as much as 702 million pounds.

Coty, which makes perfume for fashion brands Calvin Klein and Marc Jacobs and owns nail polish brand OPI and Rimmel mascara, has been suffering from declining sales growth and profits as consumers cut back on discretionary purchases.

Coty's make-up sales fell 7 percent at constant exchange rates to $1.36 billion in the year to June 2014, while its perfume revenues rose only 1 percent to $2.5 billion. The company's competitors include Estee Lauder Cos, L'Oreal and Elizabeth Arden Inc.

Coty's shares, which floated in New York in June 2013 at $17.50, have poorly performed since and were barely moving in early trading in New York, up 1.12 percent at $16.13 by 1454 GMT.

"Bourjois' brands are highly complementary to Coty's existing color cosmetics portfolio," Bart Becht, chairman and interim chief executive of Coty and one of the three partners running JAB, said in a statement.

Coty and Chanel declined to comment and provide any information beyond the short statement issued by Coty.

Bourjois is the third make-up brand in France sold in supermarkets behind L'Oreal's Gemey-Maybelline and L'Oreal Paris, according to cosmetics trade magazine CosmetiqueMag.

In France Bourjois is mainly sold in supermarkets such as Monoprix and small perfume shops.

"The complementariness for me is not evident for Coty since it already has (mascara brand) Rimmel and nail polish OPI which are sold through the same distribution channels as Bourjois and therefore are direct competitors," said Sabine de Sèze, editor in chief of CosmetiqueMag.

Bourjois, which offers a wide range of make-up products such as mascara, eye shadow and nail polish, was created in 1862 by French actor Joseph-Albert Ponsin as a provider of make-up for stage performers.

At the turn of the 20th century, the Wertheimer family, who today own Chanel, took control of the make-up brand.

Chanel, which makes a significant proportion of its revenues from best-selling perfumes such as Coco and No.5, generates nearly 6 billion euros ($8 billion) in annual sales, less than Louis Vuitton at 7.5 billion but more than Ralph Lauren at $7.45 billion (5.8 billion euros).