BUSINESS COMBINATIONS

P&G Beauty Business Acquisition

On October 1, 2016, pursuant to the Transaction Agreement (as defined below), the Company completed the Transactions (as defined below) and acquired the P&G Beauty Business in order to further strengthen the Company’s position in the global beauty industry. The purchase price was $11,570.4 and consisted of $9,628.6 of total equity consideration and $1,941.8 of assumed debt.

The P&G Beauty Business acquisition was completed pursuant to the Transaction Agreement, dated July 8, 2015 (the “Transaction Agreement”), by and among the Company, P&G, Galleria Co. (“Galleria”) and Green Acquisition Sub Inc., a wholly-owned subsidiary of the Company (“Merger Sub”). On October 1, 2016, (i) Merger Sub was merged with and into Galleria, with Galleria continuing as the surviving corporation and a direct, wholly-owned subsidiary of the Company (the “Merger”) and (ii) each share of Galleria common stock was converted into the right to receive one share of the Company’s common stock (the Merger, together with the other transactions contemplated by the Transaction Agreement, the “Transactions”).

The Company issued 409.7 million shares of common stock to the former holders of Galleria common stock, together with cash in lieu of fractional shares. Immediately after consummation of the Merger, approximately 54% of the fully-diluted shares of the Company’s common stock was held by pre-Merger holders of Galleria common stock, and approximately 46% of the fully-diluted shares of the Company’s common stock was held by pre-Merger holders of the Company’s common stock. Coty Inc. is considered to be the acquiring company for accounting purposes.

The Company estimated the preliminary fair value of acquired assets and liabilities as of the date of acquisition based on information currently available. The Company is still evaluating the fair value of the assets and liabilities assumed in the Transactions. As the Company finalizes the fair value of assets acquired and liabilities assumed, additional purchase price adjustments may be recorded during the measurement period. The Company will reflect measurement period adjustments, if any, in the period in which the adjustments are recognized.

The following table summarizes the estimated allocation of the purchase price to the net assets of the P&G Beauty Business as of the October 1, 2016 acquisition date:



	Estimated fair value			Estimated useful life (in years)
Cash and cash equivalents	$	387.6
Inventories	506.7
Property, plant and equipment	770.4			3 - 40
Goodwill	5,081.8			Indefinite
Trademarks - indefinite	1,890.0			Indefinite
Trademarks - finite	879.1			10 - 30
Customer relationships	1,795.8			1.5 - 17
License agreements	1,836.0			10 - 30
Product formulations	183.8			5 - 29
Other net working capital	10.8
Net other assets	54.9
Unfavorable contract liabilities	(130.0		)
Pension liabilities	(394.9		)
Deferred tax liability, net	(1,301.6		)
Total purchase price	$	11,570.4

Goodwill is primarily attributable to the anticipated company-specific synergies and economies of scale expected from the operations of the combined company. The synergies include certain cost savings, operating efficiencies, and leverage of the acquired brand recognition to be achieved as a result of the Transactions. Goodwill is not expected to be deductible for tax purposes. Goodwill of $342.0, $4,192.8, and $547.0 is allocated to the Luxury, Consumer Beauty and Professional Beauty segments, respectively. The allocation of goodwill to segments was based on the relative fair values of synergies.

For the three and six months ended December 31, 2016, Net revenues and Net income of the P&G Beauty Business included in the Company’s Condensed Consolidated Statements of Operations from the date of acquisition were $1,111.2 and $55.2, respectively.

The Company recognized acquisition-related costs of $133.0 and $41.0 during the three months ended December 31, 2016 and 2015, respectively and $212.4 and $56.0 for the six months ended December 31, 2016 and 2015, respectively, which were included in Acquisition-related costs in the Condensed Consolidated Statements of Operations.

Unaudited Pro Forma Information

The unaudited pro forma financial information in the table below summarizes the combined results of the Company and the P&G Beauty Business as though the companies had been combined on July 1, 2015. The pro forma adjustments include incremental amortization of intangible assets and depreciation adjustment of property, plant and equipment, based on preliminary values of each asset as well as costs related to financing the acquisition. The unaudited pro forma information also includes non-recurring acquisition-related costs as well as amortization of the inventory step-up. Pro forma adjustments were tax-effected at the Company’s statutory rates. For the pro forma basic and diluted earnings per share calculation, 409.7 million shares issued in connection with the P&G Beauty Business acquisition were considered as if issued on July 1, 2015. The pro forma information is presented for informational purposes only and may not be indicative of the results of operations that would have been achieved if the acquisition had taken place on July 1, 2015 or that may occur in the future, and does not reflect future synergies, integration costs, or other such costs or savings. The pro forma information for the three months ended December 31, 2015 and six months ended December 31, 2016 and 2015 are as follows:



	Three Months Ended December 31,		Six Months Ended December 31,
	2015 ^(a)		2016 ^(b)		2015 ^(a)
Pro forma Net revenues	$	2,462.5	$	4,407.9	$	4,647.8
Pro forma Net income	215.5		132.5		207.6
Pro forma Net income attributable to Coty Inc.	206.9		117.4		191.6
Pro forma Net income attributable to Coty Inc. per common share:
Basic	$	0.27	$	0.16	$	0.25
Diluted	$	0.27	$	0.16	$	0.25

^(a)The pro forma information for the three and six months ended December 31, 2015 combines the Company's historical results of operations for the three and six months ended December 31, 2015 with P&G Beauty Business results of operations for the three and six months ended December 31, 2015. The pro forma information included $0.0 and $133.0 of non-recurring acquisition-related costs as well as $12.2 and $48.7 of amortization of inventory step up for the three and six months ended December 31, 2015, respectively.

^(b)The pro forma information for the six months ended December 31, 2016 combines the Company's historical results of operations for the six months ended December 31, 2016 with P&G Beauty Business results of operations for the three months ended September 30, 2016. P&G Beauty Business results of operations for the three months ended December 31, 2016 are already included in the Company’s historical results of operation. For the six months ended December 31, 2016, the pro forma information excluded $314.1 of non-recurring acquisition-related costs and $36.5 of amortization of inventory step up.

ghd Acquisition

On November 21, 2016, the Company completed the acquisition of 100% of the equity interest of Lion/Gloria Topco Limited which held the net assets of ghd (“ghd”) which stands for “Good Hair Day”, a premium brand in high-end hair styling appliances, pursuant to a sale and purchase agreement. The ghd acquisition is expected to further strengthen the Company’s professional hair category and is included in the Professional Beauty segment’s results after the acquisition date. The total cash consideration paid net of acquired cash and cash equivalents was £430.2 million, the equivalent of $531.5, at the time of closing, which was funded through cash on hand and available debt.

The Company estimated the preliminary fair value of acquired assets and liabilities as of the date of acquisition based on information currently available. The Company is still evaluating the fair value of the assets and liabilities assumed from the ghd acquisition. As the Company finalizes the fair value of assets acquired and liabilities assumed, additional purchase price adjustments may be recorded during the measurement period in fiscal 2017 and 2018. The Company will reflect measurement period adjustments, if any, in the period in which the adjustments are recognized.

The following table summarizes the estimated allocation of the purchase price to the net assets of ghd as of the November 21, 2016 acquisition date:



	Estimated fair value			Estimated useful life (in years)
Cash and cash equivalents	$	7.1
Inventories	79.8
Property, plant and equipment	11.3			3 - 10
Goodwill	175.5			Indefinite
Indefinite-lived other intangibles assets	163.8			Indefinite
Customer relationships	44.2			14 - 21
Technology	138.6			10 - 20
Other net working capital	(7.4		)
Net other assets	0.9
Deferred tax liability, net	(75.3		)
Total purchase price	538.5

Goodwill is not expected to be deductible for tax purposes. The goodwill is attributable to expected synergies resulting from integrating ghd’s products into the Company’s existing sales channels.

For the three and six months ended December 31, 2016, Net revenues and Net income (loss) of ghd were included in the Company’s Condensed Consolidated Statements of Operations from the date of acquisition were $44.4 and $(6.3), respectively, including the impact to net income of purchase price adjustments of $(13.8), net of tax.

The Company recognized acquisition-related costs of $0.5 and $1.8 during the three and six months ended December 31, 2016, respectively, which are included in Acquisition-related costs in the Condensed Consolidated Statements of Operations.

Brazil Acquisition

On February 1, 2016, the Company completed the acquisition of 100% of the net assets of the personal care and beauty business of Hypermarcas S.A. (the “Brazil Acquisition”) pursuant to a share purchase agreement in order to further strengthen its position in the Brazilian beauty and personal care market. The total consideration of R$3,599.5, the equivalent of $901.9, at the time of closing, was paid during fiscal 2016.

The Company has finalized the valuation of assets acquired and liabilities assumed for the Brazil Acquisition. The Company recognized certain measurement period adjustments as disclosed below during the quarter ended September 30, 2016. The measurement period for the Brazil Acquisition was closed as of September 30, 2016.

The following table summarizes the allocation of the purchase price to the net assets acquired as of the February 1, 2016 acquisition date:



	Estimated fair value as previously reported ^(a)			Measurement period adjustments ^(b)			Estimated fair value as adjusted			Estimated useful life (in years)
Cash and cash equivalents	$	11.1		$	—		$	11.1
Inventories	45.6			—			45.6
Property, plant and equipment	95.4			—			95.4			2 - 40
Goodwill	553.7			(16.6		)	537.1			Indefinite
Trademarks - indefinite	147.1			—			147.1			Indefinite
Trademarks - finite	10.3			—			10.3			5 - 15
Customer relationships	44.6			—			44.6			13 - 28
Product formulations	12.8			—			12.8			3
Other net working capital	0.7			—			0.7
Net other assets	2.1			(0.7		)	1.4
Deferred tax liability, net	(21.5		)	17.3			(4.2		)
Total purchase price	$	901.9		$	—		$	901.9

^(a)As previously reported in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2016.

^(b)The Company recorded measurement period adjustments in the first quarter of fiscal 2017 to account for a $0.7 asset retirement obligation, as well as, a net decrease in net deferred tax liability of $17.3 million as of the February 1, 2016 acquisition date. These adjustments were offset against Goodwill.

The Company has completed the local tax requirements allowing approximately $500.0 of goodwill and $44.6 of customer relationships assets to be tax deductible.

The Company recognized acquisition-related costs of $0.4 and $1.1 during the three and six months ended December 31, 2016, respectively, and $0.6 during the three and six months ended December 31, 2015 which are included in Acquisition-related costs in the Condensed Consolidated Statements of Operations.