NEW YORK - Coty Inc. (NYSE:COTY) announced Monday it has agreed to terminate its Gucci Beauty license and return it to Kering for approximately $400 million. The transaction represents roughly 20% of Coty’s current market capitalization of $1.97 billion, coming as the stock trades at $2.23, down 55% over the past year.

Under the agreement, Coty will continue operating Gucci Beauty through at least June 30, 2027, ending the license roughly one year before its original expiration date, according to a press release statement. The company received $250 million in cash at signing and will receive an additional $150 million no later than September 30, 2027, with up to $30 million contingent on certain criteria.

Coty will also sell Kering sufficient Gucci Beauty inventory to support the transition. The company estimates cash taxes of approximately $30 million related to the transaction.

"This agreement delivers a favorable outcome to conclude the Gucci Beauty license, enabling Coty to redeploy capital and focus on our priority brands," said Markus Strobel, Executive Chairman and Interim CEO of Coty.

The proceeds will be used for debt reduction, investment in Coty’s core prestige fragrance and beauty portfolio, and organizational optimization. The debt paydown is particularly significant given Coty’s total debt of $3.43 billion and debt-to-equity ratio of 1.11. According to InvestingPro analysis, which tracks over 1,400 US equities with comprehensive metrics, the company appears undervalued at current levels, with a Fair Value indicating potential upside of approximately 40%.

Coty acquired the Gucci Beauty license in 2016 and has grown revenues by more than 60% since 2019, according to the company. The business includes fragrance franchises such as Gucci Flora, Bloom, Guilty, and Alchemist Garden.

As part of the agreement, Coty and Kering have agreed to mutually resolve all pending litigation and related claims concerning the Gucci Beauty license.

Coty, founded in Paris in 1904, sells prestige and mass market beauty products in over 120 countries and territories. While the company posted a loss of $0.62 per share over the last twelve months, InvestingPro Tips highlight that analysts predict the company will be profitable this year, with earnings forecast at $0.22 per share. The company maintains an impressive gross profit margin of 63.2%. Investors seeking deeper insights can access Coty’s comprehensive Pro Research Report, which transforms complex financial data into clear, actionable intelligence.

In other recent news, Coty Inc. reported its fiscal third-quarter results for 2026, showing mixed signals with an earnings per share (EPS) of -$0.03, which missed the forecasted $0.0016. However, the company managed a slight revenue beat, with revenue reaching $1.28 billion against the expected $1.27 billion. Additionally, Coty announced organizational changes, including the departure of three senior executives and a new reporting structure for its Prestige division. Executive Chairman and interim CEO Markus Strobel will now directly control Prestige commercial operations to enhance market responsiveness. Meanwhile, Kering announced that Gucci and L’Oréal have signed a 50-year exclusive beauty license agreement, which is set to take effect in mid-2027. This agreement, part of a previously announced Beauty and Wellness alliance, is contingent on regulatory approvals and the end of Gucci’s current license with Coty. These developments highlight significant shifts within Coty and a major collaboration between Gucci and L’Oréal.

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