Coty Inc is paying $600m for a majority stake in Kylie Jenner’s makeup and skincare businesses, the company said on Monday, as it looks to tap into the reality TV star’s huge social media reach.
One of the cosmetics world’s older names, Coty is seeking to revitalise sales on the back of its broad global distribution and is banking on Jenner’s more than 270 million social media followers to attract a younger audience.
Shares of Coty gained as much as five percent on the news.
Jenner, 22, is the youngest sibling of the wildly popular Kardashian-Jenner clan, which has become a household name more than 10 years after their reality TV show, Keeping up with the Kardashians, became a smash hit.
She started her make up line in 2015 with lipstick and lip liner kits. The kits sold out within minutes of launching, an early sign of her power as a social media influencer.
Coty said Kylie Cosmetics had an estimated $177m in net revenues over the past 12 months.
Forbes, which named her the youngest self-made billionaire on its 2018 list, said Jenner’s line of cosmetics brought in sales of an estimated $360m in 2018.
Coty will hold 51 percent of Jenner’s business, valuing her company at about $1.2bn.
“Kylie is a big brand in beauty today. She’s very influential … [but] Coty remains financially leveraged,” DA Davidson retail analyst Linda Bolton Weiser said.
Celebrities, including Jenner, are leveraging their huge social media following to launch their cosmetics and lifestyle brands and compete with established players in the market.
Social media-powered beauty brands such as Glossier, Jessica Alba’s Honest Beauty and Huda Beauty have all notched up about $1bn in valuation, according to media reports.
“I look forward to continuing the creativity and ingenuity for each collection that consumers have come to expect and engaging with my fans across social media,” Jenner said in a statement.
Coty has been doubling down on its skincare and fragrance products, rolling out new luxury fragrances and lipsticks, while spending more on marketing to combat falling sales.
The company, which is majority-owned by German conglomerate JAB Holdings, has struggled to integrate about 40 beauty brands, including Covergirl and Max Factor, that it bought from Procter & Gamble in 2016, forcing it to take billions of dollars in writedowns and outline a four-year restructuring plan.
The partnership will add to Coty’s net revenue growth of its core fragrance, cosmetics and skincare business by more than one percent a year over the next three years, the company said.
The deal is expected to close in the third quarter of fiscal year 2020, Coty said.