424B3 1 d132778d424b3.htm 424B3 424B3
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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-210856

PROSPECTUS

THE PROCTER & GAMBLE COMPANY

Offer to exchange all shares of common stock of

GALLERIA CO.

that are owned by The Procter & Gamble Company and will be converted into shares of class A common stock of

COTY INC.

for shares of common stock of The Procter & Gamble Company

 

 

The exchange offer and withdrawal rights will expire at 12:00 midnight, New York City time, on September 29, 2016, unless the offer is extended or earlier terminated. Such date or, if the offer is extended, the date to which the offer is extended, is referred to in this prospectus as the “Expiration Date.” Shares of P&G common stock tendered pursuant to the exchange offer may be withdrawn at any time prior to the expiration of the exchange offer.

The Procter & Gamble Company (“P&G”) is offering to exchange all shares of common stock of Galleria Co., a wholly owned subsidiary of P&G (“Galleria Company” and such common stock, “Galleria Company common stock”) that are owned by P&G for shares of common stock of P&G, without par value (“P&G common stock”), that are validly tendered and not properly withdrawn. You should carefully read the terms of the exchange offer, which are described in this prospectus. None of P&G, Galleria Company, Coty Inc. (“Coty”), any of their respective directors or officers or any of their respective affiliates or representatives makes any recommendation as to whether you should participate in the exchange offer. You must make your own investment decision after reading this prospectus and consulting with your advisors.

The transactions described in this prospectus are being undertaken to transfer certain assets and liabilities relating to P&G’s global fine fragrances, salon professional, cosmetics and retail hair color businesses, along with select hair styling brands, to Coty. As promptly as practicable following completion of the exchange offer and, if the exchange offer is completed but is not fully subscribed, a subsequent pro rata dividend of all remaining shares of Galleria Company common stock to the remaining P&G shareholders, Green Acquisition Sub Inc., a wholly owned subsidiary of Coty (“Merger Sub”), will merge with and into Galleria Company, with Galleria Company surviving the merger and becoming a wholly owned subsidiary of Coty (the “Merger”). Pursuant to the Merger, each share of Galleria Company common stock will automatically convert into the right to receive one fully paid and non-assessable share of class A common stock, par value $0.01 per share, of Coty (“Coty common stock”). No trading market currently exists or will ever exist for shares of Galleria Company common stock. You will not be able to trade the shares of Galleria Company common stock before they convert into shares of Coty common stock in the Merger. There can be no assurance that shares of Coty common stock issued in the Merger will trade at the same prices at which shares of Coty common stock trade prior to the Merger.

For each $1.00 of P&G common stock accepted in the exchange offer, you will receive approximately $1.075 of shares of Galleria Company common stock, based on the Average P&G Stock Price and the Average Coty Stock Price determined by P&G as described in this prospectus and subject to an upper limit of 3.9033 shares of Galleria Company common stock per share of P&G common stock. See “The Exchange Offer—Terms of the Exchange Offer. If the upper limit is in effect, you will receive less than $1.075 of shares of Galleria Company common stock for each $1.00 of P&G common stock that you tender, and you could receive much less.

The Average P&G Stock Price and the Average Coty Stock Price will be determined by P&G by reference to the simple arithmetic average of the daily volume-weighted average prices (“VWAPs”) of shares of P&G common stock and shares of Coty common stock on the New York Stock Exchange (“NYSE”) during a period of three consecutive trading days (currently expected to be September 23, 2016, September 26, 2016 and September 27, 2016) ending on and including the second trading day preceding the Expiration Date.

The indicative exchange ratio that would have been in effect following the official close of trading on the NYSE on August 31, 2016 (the trading day before the date of this prospectus), based on the daily VWAPs of shares of P&G common stock and shares of Coty common stock on August 29, 2016, August 30, 2016 and August 31, 2016 would have provided for 3.4550 shares of Galleria Company common stock to be exchanged for every share of P&G common stock accepted. The value of Galleria Company common stock received, and, following the Merger, the value of Coty common stock received, may not remain above the value of shares of P&G common stock tendered for exchange following the expiration of the exchange offer.

 

 

See “Risk Factors” beginning on page 56 for a discussion of factors that you should consider in connection with the exchange offer and an investment in Galleria Company and Coty.

 

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued in the exchange offer or determined that this prospectus is accurate or complete. Any representation to the contrary is a criminal offense.

 

 

The date of this prospectus is September 1, 2016.


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The final exchange ratio used to determine the number of shares of Galleria Company common stock, and effectively the number of shares of Coty common stock, that you will receive for each share of P&G common stock accepted in the exchange offer (as well as whether the upper limit on the number of shares that can be received for each share of P&G common stock tendered will be in effect) will be announced at www.dfking.com/pg and separately by press release no later than 9:00 a.m., New York City time, on the trading day immediately preceding the Expiration Date. This information will also be available from D.F. King & Co., Inc. (the “Information Agent”) at (212) 269-5550 (for banks and brokers) and (877) 297-1747 (for all other callers). Prior to the announcement of the final exchange ratio, indicative exchange ratios (calculated in the manner described in this prospectus) will also be available from the Information Agent.

This prospectus provides information regarding P&G, Galleria Company, Coty and the exchange offer in which shares of P&G common stock may be exchanged for shares of Galleria Company common stock, which will then be automatically converted in connection with the Merger into the right to receive shares of Coty common stock and distributed to participating P&G shareholders as described herein. Shares of P&G common stock are listed on the NYSE under the symbol “PG.” Shares of Coty common stock are listed on the NYSE under the symbol “COTY.” On August 31, 2016, the last reported sale price of shares of P&G common stock on the NYSE was $87.31 and the last reported sale price of shares of Coty common stock on the NYSE was $26.95. No trading market currently exists for shares of Galleria Company common stock, and no such market will exist in the future.

If the exchange offer is completed but is not fully subscribed, P&G will distribute all of the remaining shares of Galleria Company common stock that it owns as a subsequent pro rata dividend to P&G shareholders (after giving effect to the completion of the exchange offer). This prospectus covers all shares of Galleria Company common stock offered by P&G in the exchange offer and all shares of Galleria Company common stock that may be distributed by P&G as a subsequent pro rata dividend.

The fully diluted shares of Coty common stock immediately prior to the Merger are expected to represent approximately 46% of the fully diluted shares of Coty common stock immediately after the Merger, and the shares of Coty common stock issued in connection with the conversion of shares of Galleria Company common stock in the Merger are expected to represent approximately 54% of the fully diluted shares of Coty common stock immediately after the Merger.

P&G’s obligation to exchange shares of Galleria Company common stock for shares of P&G common stock is subject to the conditions listed under “The Exchange Offer—Conditions for Completion of the Exchange Offer,” including the “Minimum Condition” or the “Revised Minimum Condition,” as applicable, the satisfaction of conditions to the Merger and other conditions.


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TABLE OF CONTENTS

 

Information Regarding Content of This Prospectus

     1   

Helpful Information

     3   

Questions and Answers About the Exchange Offer and the Transactions

     6   

Summary

     21   

Summary Historical and Pro Forma Financial Data

     43   

Risk Factors

     56   

Cautionary Statement on Forward-Looking Statements

     71   

The Exchange Offer

     73   

Information on P&G

     95   

Information on Coty

     96   

Information on P&G Beauty Brands

     108   

Business Strategies After the Transactions

     116   

Management’s Discussion and Analysis of Financial Condition and Results of Operations of P&G Beauty Brands

     118   

Historical Per Share, Market Price and Dividend Data

     132   

Selected Historical and Pro Forma Financial Data

     135   

The Transactions

     156   

The Transaction Agreement

     199   

Additional Agreements

     224   

Debt Financing

     227   

Ownership of Coty Common Stock

     233   

Description of Coty Capital Stock

     236   

Description of Galleria Company Capital Stock

     242   

Comparison of Shareholder Rights

     244   

Certain Relationships and Related Transactions

     254   

Legal Matters

     254   

Experts

     254   

Where You Can Find More Information; Incorporation By Reference

     255   

Index to Combined Financial Statements

     F-1   

ANNEXES

  

Opinion of Morgan Stanley & Co. LLC

     A-1   

Opinion of Barclays Capital Inc.

     B-1   


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INFORMATION REGARDING CONTENT OF THIS PROSPECTUS

Securities and Exchange Commission Filings

This prospectus incorporates by reference important business and financial information about P&G and Coty from documents filed with the U.S. Securities and Exchange Commission (the “SEC”) that have not been included herein or delivered herewith. This information is available without charge at the website that the SEC maintains at www.sec.gov, as well as from other sources. See “Where You Can Find More Information; Incorporation by Reference.” In addition, you may ask any questions about the exchange offer or request copies of the exchange offer documents and the other information incorporated by reference in this prospectus, without charge, upon written or oral request to the Information Agent, D.F. King & Co., Inc., located at 48 Wall Street, New York, New York 10005, at (212) 269-5550 (for banks and brokers) and (877) 297-1747 (for all other callers). In order to receive timely delivery of any written materials requested, you must make your requests no later than September 23, 2016.

Sources of Information

All information contained or incorporated by reference in this prospectus with respect to Coty, Merger Sub and their subsidiaries, and all statements contained in this prospectus concerning Coty, Merger Sub and their subsidiaries, have been provided by Coty. All other information contained or incorporated by reference in this prospectus, including information with respect to P&G, Galleria Company and their subsidiaries and P&G Beauty Brands and with respect to the terms and conditions of the exchange offer, and all statements contained in this prospectus concerning P&G, Galleria Company and their subsidiaries and P&G Beauty Brands, have been provided by P&G.

Trademarks and Market and Industry Data

This prospectus contains references to trademarks, trade names and service marks that are owned by P&G, including Always®, Ambi Pur®, Ariel®, Bounty®, Charmin®, Crest®, Dawn®, Downy®, Fairy®, Febreze®, Fusion®, Gain®, Gillette®, Head & Shoulders®, Lenor®, Mach3®, Oral-B®, Pampers®, Pantene®, Prestobarba®, SK-II®, Tide®, Vicks® and Whisper®.

This prospectus contains references to trademarks, trade names and service marks that are owned by P&G Beauty Brands, including Balsam Color®, Bellady®, Blondor®, Clairol®, Color Charm®, Color Fresh / Perfection Color Touch®, CoverGirl®, Design®, Forte®, Kadus®, Kadus Professional®, L’image®, Londa®, Max Factor®, Natural Instincts®, New Wave®, New Wave Design®, Nioxin®, Olay®, Outlast®, Salon Lifestyle®, Sebastian®, Soft Color®, Shockwaves®, Silvikrin®, Soft Color®, System Professional®, Vidal Sassoon® and Wella®.

This prospectus also contains references to trademarks, trade names and service marks that are licensed to P&G Beauty Brands, including Alexander McQueen®, Bruno Banani®, Dolce & Gabbana®, Gucci®, HUGO BOSS®, Escada Fashion®, Gabriela Sabatini®, James Bond®, Lacoste®, Mexx® and Stella McCartney®. Effective July 29, 2016, Christina Aguilera® was licensed to Elizabeth Arden, Inc. pursuant to its acquisition of the global license for the Christina Aguilera fine fragrance brand from P&G.

Unless otherwise specified in this prospectus, all industry and market share data relating to P&G Beauty Brands and the beauty industry included in this prospectus is based on P&G’s market research and its internally developed, proprietary analytical modeling system as well as statistical data obtained or derived from independent market research firms. Some of these third-party firms, such as Euromonitor International Limited (“Euromonitor”) and ACNielsen, categorize data differently from how P&G Beauty Brands categorizes data. Information in this prospectus on the beauty industry is from independent market research carried out by Euromonitor but should not be relied upon in making, or refraining from making, an investment decision. Market share data is used by P&G to standardize market share information across different products and retail channels and is regularly used by P&G in the analysis of P&G Beauty Brands. While P&G has no reason to believe any third-party information is not reliable, P&G has not independently verified this information.


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O P I®, philosophy®, Rimmel®, Sally Hansen®, Lancaster®, Astor®, Bourjois®, Joop!®, and Manhattan® are registered trademarks of Coty for the goods manufactured and sold by Coty under those marks in key sales countries. The adidas®, Calvin Klein®, Chloé®, DAVIDOFF®, Marc Jacobs®, Playboy®, Balenciaga®, Beyoncé®, Bottega Veneta®, Guess?®, Katy Perry®, Roberto Cavalli®, Miu Miu®, Vespa®, Jil Sander®, David Beckham®, Jennifer Lopez® and Enrique Iglesias® trademarks are licensed to Coty in connection with the goods manufactured and sold by Coty in key sales countries.

Unless otherwise indicated, market and industry data and forecasts relating to Coty included in this prospectus, including Coty’s general expectations about its industry, market position, market opportunity and market size, is based on data from various sources including internal data and estimates as well as third-party sources widely available to the public such as independent industry publications (including Euromonitor), government publications, reports by market research firms or other published independent sources and on Coty’s assumptions based on that data and other similar sources. Coty did not fund and is not otherwise affiliated with the third-party sources that it cites. Industry publications and other published sources generally state that the information contained therein has been obtained from third-party sources believed to be reliable. Internal data and estimates are based upon information obtained from trade and business organizations and other contacts in the markets in which Coty operates and Coty’s management’s understanding of industry conditions, and such information has not been verified by any independent sources. This data involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. While Coty believes the market, industry and other information included in this prospectus to be the most recently available and to be generally reliable, such information is inherently imprecise and Coty has not independently verified any third-party information or verified that more recent information is not available.

Statements in this prospectus about P&G Beauty Brands that Coty proposes to acquire are made primarily on the basis of information furnished by the owners and management of P&G Beauty Brands. Statements in this prospectus about Coty are made primarily on the basis of information furnished by the owners and management of Coty.

 

 

This prospectus is not an offer to sell or exchange and it is not a solicitation of an offer to buy or exchange any shares of P&G common stock, Galleria Company common stock or Coty common stock in any jurisdiction in which the offer, sale or exchange is not permitted. Non-U.S. shareholders should consult their advisors in considering whether they may participate in the exchange offer in accordance with the laws of their home countries and, if they do participate, whether there are any restrictions or limitations on transactions in the shares of P&G common stock, Galleria Company common stock or Coty common stock that may apply in their home countries. P&G, Galleria Company and Coty cannot provide any assurance about whether such limitations may exist. See “The Exchange Offer—Legal and Other Limitations; Certain Matters Relating to Non-U.S. Jurisdictions” for additional information about limitations on the exchange offer outside the United States.

 

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HELPFUL INFORMATION

As used in this prospectus, unless otherwise stated herein or the context otherwise provides:

 

    Average P&G Stock Price” means the price determined by P&G by reference to the simple arithmetic average of the daily VWAPs of shares of P&G common stock on the NYSE during the Averaging Period.

 

    Average Coty Stock Price” means the price determined by P&G by reference to the simple arithmetic average of the daily VWAPs of shares of Coty common stock on the NYSE during the Averaging Period.

 

    Averaging Period” means the period of three consecutive trading days (currently expected to be September 23, 2016, September 26, 2016 and September 27, 2016) ending on and including the second trading day preceding the Expiration Date.

 

    Code” means the Internal Revenue Code of 1986, as amended.

 

    Coty” means Coty Inc., a Delaware corporation and, unless the context otherwise requires, its consolidated subsidiaries.

 

    Coty class B common stock” means the Coty class B common stock, par value $0.01 per share, which JAB Cosmetics B.V. will irrevocably elect to convert into shares of Coty common stock, which conversion will be effective no later than two business days prior to the closing of the Merger. Following this conversion and the completion of the Transactions, JAB Cosmetics B.V. will remain Coty’s largest stockholder, owning approximately 36% of the fully diluted shares of Coty common stock.

 

    Coty common stock” means the Coty class A common stock, par value $0.01 per share.

 

    Coty Credit Agreement” means the Credit Agreement, dated as of October 27, 2015, among Coty, as the parent borrower, the other borrowers party thereto from time to time, the lenders party thereto and JPMorgan Chase Bank, N.A. (“JPMCB”), as administrative agent, and the other agents from time to time party thereto, relating to the Coty Senior Secured Credit Facilities.

 

    Coty Group” means Coty and each of its consolidated subsidiaries including, after the consummation of the Merger, Galleria Company.

 

    Coty Senior Secured Credit Facilities” means the $4.500 billion senior secured credit facilities obtained by Coty in connection with the completion of the Transactions, comprised of (i) a $1.500 billion five-year revolving credit facility, which includes up to $80.0 million in swingline loans available for short-term borrowings, (ii) a $1.750 billion five-year term loan A facility and (iii) a seven-year term loan B facility comprised of a $500.0 million tranche and a €665.0 million tranche.

 

    Distribution” means the distribution by P&G of its shares of Galleria Company common stock to P&G shareholders by way of an exchange offer and, if the exchange offer is completed but is not fully subscribed, the distribution of the Remaining Shares to the Remaining P&G Shareholders as described herein.

 

    Divested Brands” means the Rochas, Laura Biagiotti, Naomi Campbell and Giorgio Beverly Hills brands that were divested by P&G in May 2015, June 2015, September 2014 and February 2016, respectively, as well as Puma, which was discontinued by P&G in fiscal 2015.

 

    Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

    Exchange Agent” means Wells Fargo Bank, N.A.

 

    Excluded Brands” means the Dolce & Gabbana and Christina Aguilera fragrance licenses, the latter of which was acquired by Elizabeth Arden, Inc. on July 29, 2016.

 

    Expiration Date” means the last trading day tenders will be accepted, whether on September 29, 2016 or any later trading day to which the exchange offer may be extended.

 

    fully diluted” means shares outstanding as well as all outstanding equity grants and is not necessarily calculated in accordance with GAAP.

 

    GAAP” means accounting principles generally accepted in the United States.

 

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    Galleria” means certain specified assets and liabilities related to P&G Beauty Brands, excluding the Excluded Brands, that will be transferred by P&G and its subsidiaries to Galleria Company as part of the Separation and thereafter acquired by Coty in the Merger.

 

    Galleria Company” means Galleria Co., a Delaware corporation and wholly owned subsidiary of P&G, and, unless the context otherwise requires, its consolidated subsidiaries.

 

    Galleria Company common stock” means Galleria Company common stock, par value $0.01 per share.

 

    Galleria Credit Agreement” means the Credit Agreement, dated January 26, 2016, by and among Galleria Company, as initial borrower, the other borrowers from time to time party thereto, JPMCB, as administrative agent and collateral agent, and the other agents and lenders from time to time party thereto, relating to the Galleria Senior Secured Credit Facilities.

 

    Galleria Senior Secured Credit Facilities” means the $4.500 billion senior secured credit facilities comprised of (i) a $2.000 billion five-year term loan A facility, (ii) a $1.000 billion seven-year term loan B facility and (iii) a $1.500 billion five-year revolving credit facility.

 

    Galleria Transfer” means the contribution of the Galleria assets by P&G to Galleria Company in exchange for Galleria Company common stock, any distribution to P&G of a portion of the Recapitalization Amount and the assumption of the Galleria liabilities, in each case, in accordance with the requirements of the Transaction Agreement.

 

    HSR Act” means the Hart–Scott–Rodino Antitrust Improvements Act of 1976.

 

    Information Agent” means D.F. King & Co., Inc.

 

    Intended Tax-Free Treatment” means that (i) the Galleria Transfer, taken together with the Distribution, qualifies as a tax-free reorganization pursuant to section 368(a)(1)(D) of the Code, (ii) the Distribution, as such, qualifies as a distribution of Galleria Company common stock to P&G shareholders pursuant to section 355 of the Code, pursuant to which no taxable gain or loss should be recognized for U.S. federal income tax purposes, and (iii) the Merger qualifies as a tax-free reorganization pursuant to section 368(a) of the Code pursuant to which no taxable gain or loss will be recognized by Galleria Company shareholders for U.S. federal income tax purposes, except to the extent of cash received in lieu of fractional shares of Coty common stock.

 

    IRS” means the Internal Revenue Service.

 

    market disruption event” with respect to P&G common stock or Coty common stock means a suspension, absence or material limitation of trading of P&G common stock or Coty common stock on the NYSE for more than two hours of trading or a breakdown or failure in the price and trade reporting systems of the NYSE as a result of which the reported trading prices for P&G common stock or Coty common stock on the NYSE, during any half-hour trading period during the principal trading session of the NYSE are materially inaccurate, as determined by P&G, on the day with respect to which such determination is being made. For purposes of such determination: (i) a limitation on the hours or number of days of trading will not constitute a market disruption event if it results from an announced change in the regular business hours of the NYSE and (ii) limitations pursuant to any applicable rule or regulation enacted or promulgated by the NYSE, any other self-regulatory organization or the SEC of similar scope as determined by P&G shall constitute a suspension, absence or material limitation of trading.

 

    Merger” means the merger of Merger Sub with and into Galleria Company, with Galleria Company surviving the merger and becoming a wholly owned subsidiary of Coty, as contemplated by the Transaction Agreement.

 

    Merger Sub” means Green Acquisition Sub Inc., a Delaware corporation and wholly owned subsidiary of Coty.

 

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    Non-Color Haircare Business” means P&G’s business of sourcing, manufacturing, marketing, selling, distributing and developing (i) hair care and styling products for sale in the salon professional channel, and (ii) hair styling products for sale in the retail channel that are branded under the Wella, Silvikrin, Shockwaves, Londa and New Wave marks.

 

    NYSE” means the New York Stock Exchange.

 

    P&G” means The Procter & Gamble Company, an Ohio corporation, and, unless the context otherwise requires, its consolidated subsidiaries.

 

    P&G Beauty Brands” means the business of P&G and its subsidiaries relating to P&G’s global fine fragrances, salon professional, cosmetics and retail hair color businesses, along with select hair styling brands, including the Excluded Brands unless otherwise noted.

 

    P&G common stock” means P&G common stock, without par value.

 

    P&G shareholders” means the holders of shares of P&G common stock.

 

    P&G U.S. benefit plans” means The Procter & Gamble Profit Sharing Trust and Employee Stock Ownership Plan, The Procter & Gamble Savings Plan, The Profit Sharing Retirement Plan of The Procter & Gamble Commercial Company, The Procter & Gamble Commercial Company Employees’ Savings Plan and The Gillette Company Employee Stock Ownership Plan.

 

    Recapitalization” means Galleria Company (i) issuing and delivering to P&G, in exchange for Galleria, additional shares of Galleria Company common stock such that the total number of shares of Galleria Company common stock held by P&G at the time of the Distribution will equal 409,726,299, all of which shares of Galleria Company common stock P&G will dispose of in the Distribution, (ii) incurring indebtedness under the Galleria Senior Secured Credit Facilities and (iii) using all or a portion of the cash proceeds of the indebtedness incurred on or prior to the Recapitalization Date under the Galleria Senior Secured Credit Facilities, along with any cash contributed by P&G to Galleria Company, to purchase or otherwise receive the Galleria assets from P&G or its subsidiaries. Galleria Company will distribute to P&G, prior to the Distribution, any borrowed amounts remaining after funding these asset purchases.

 

    Recapitalization Amount” has the meaning ascribed to it under “The Transaction Agreement—Recapitalization.”

 

    Recapitalization Date” means the date on which the Recapitalization occurs.

 

    Remaining P&G Shareholders” means the remaining P&G shareholders, determined after giving effect to the completion of the exchange offer, that will receive the Remaining Shares.

 

    Remaining Shares” means any remaining shares of Galleria Company common stock held by P&G after completion of the exchange offer.

 

    SEC” means the U.S. Securities and Exchange Commission.

 

    Securities Act” means the Securities Act of 1933, as amended.

 

    Separation” means the transfer by P&G and its subsidiaries of the Galleria assets and liabilities to Galleria Company.

 

    Transaction Agreement” means the Transaction Agreement, dated as of July 8, 2015, as amended, by and among P&G, Galleria Company, Coty and Merger Sub.

 

    Transactions” means the transactions contemplated by the Transaction Agreement, which provide, among other things, for the Separation, the Recapitalization, the Distribution and the Merger, as described in the section “The Transactions.”

 

    VWAP” means the volume-weighted average price.

 

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QUESTIONS AND ANSWERS ABOUT THE EXCHANGE OFFER AND THE TRANSACTIONS

The following are some of the questions that P&G shareholders may have and answers to those questions. These questions and answers, as well as the following summary, are not meant to be a substitute for the information contained in the remainder of this prospectus, and this information is qualified in its entirety by the more detailed descriptions and explanations contained elsewhere in this prospectus. You are urged to read this prospectus in its entirety prior to making any investment decision.

Questions and Answers About the Exchange Offer

 

1. Am I required to participate in the exchange offer?

No. You are not required to participate in the exchange offer. You may tender all, some or none of your shares of P&G common stock. If you want to retain your shares of P&G common stock, you do not need to take any action in connection with the exchange offer. However, upon the completion of the Transactions, P&G Beauty Brands will no longer be owned by P&G.

 

2. How do I decide whether to participate in the exchange offer?

Whether you should participate in the exchange offer depends on many factors. You should examine carefully your specific financial position, plans and needs before you decide whether to participate, as well as the relative risks associated with an investment in Coty (including Galleria) and P&G (excluding Galleria).

In addition, you should consider all of the factors described in “Risk Factors” beginning on page 56, including the risks relating to an investment in shares of Coty common stock included or incorporated by reference in this prospectus. None of P&G, Galleria Company, Coty, any of their respective directors or officers or any of their respective affiliates or representatives makes any recommendation as to whether you should tender your shares of P&G common stock. You must make your own decision after carefully reading this prospectus and consulting with your advisors in light of your own particular circumstances. You are strongly encouraged to read this prospectus carefully and in its entirety.

 

3. How do I participate in the exchange offer?

The procedures you must follow to participate in the exchange offer will depend on whether you hold your shares of P&G common stock in certificated form, in book-entry form through the Direct Registration System (“DRS”) or the The Procter & Gamble Company Direct Stock Purchase Plan (“DSPP”), through a broker, dealer, commercial bank, trust company or similar institution or through a P&G U.S. benefit plan. For specific instructions about how to participate, see “The Exchange Offer—Terms of the Exchange Offer—Procedures for Tendering.”

 

4. Who may participate in the exchange offer and will it be extended outside the United States?

Any U.S. holder of shares of P&G common stock during the exchange offer period, which will be at least 20 business days, may participate in the exchange offer. For any beneficial owners of shares of P&G common stock held in a P&G U.S. benefit plan, a fiduciary appointed under each of those plans determines whether (i) to permit beneficial owners to elect to tender shares of P&G common stock for exchange or (ii) alternatively, to exchange shares of P&G common stock held in each plan for the benefit of employees and former employees of P&G and their beneficiaries. P&G has been informed by each of the fiduciaries of the P&G U.S. benefit plans that beneficial owners will not be permitted to elect to tender shares held in those plans and that the fiduciaries do not expect to elect to tender shares held for the benefit of employees, former employees and their beneficiaries in the exchange offer.

Although P&G has mailed this prospectus to its shareholders to the extent required by U.S. law, including shareholders located outside the United States, this prospectus is not an offer to buy, sell or exchange and it is not

 

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a solicitation of an offer to buy, sell or exchange any shares of P&G common stock, Galleria Company common stock or Coty common stock in any jurisdiction in which such offer, sale or exchange is not permitted.

Countries outside the United States generally have their own legal requirements that govern securities offerings made to persons resident in those countries and often impose stringent requirements about the form and content of offers made to the general public. None of P&G, Galleria Company or Coty has taken any action under non-U.S. regulations to facilitate a public offer to exchange the shares of P&G common stock, Galleria Company common stock or Coty common stock outside the United States. Accordingly, the ability of any non-U.S. shareholder to tender shares of P&G common stock in the exchange offer will depend on whether there is an exemption available under the laws of such person’s home country that would permit the shareholder to participate in the exchange offer without the need for P&G, Galleria Company or Coty to take any action to facilitate a public offering in that country or otherwise. For example, some countries exempt transactions from the rules governing public offerings if they involve persons who meet certain eligibility requirements relating to their status as sophisticated or professional investors.

Non-U.S. shareholders should consult their advisors in considering whether they may participate in the exchange offer in accordance with the laws of their home countries and, if they do participate, whether there are any restrictions or limitations on transactions in the shares of P&G common stock, Galleria Company common stock or Coty common stock that may apply in their home countries. P&G, Galleria Company and Coty cannot provide any assurance about whether such limitations may exist. See “The Exchange Offer—Legal and Other Limitations; Certain Matters Relating to Non-U.S. Jurisdictions” for additional information about limitations on the exchange offer outside the United States.

P&G believes a substantial majority of its shareholders are U.S. investors and does not expect the legal limitations described in this answer to cause the exchange offer to not be fully subscribed.

 

5. Can holders of P&G preferred stock participate in the exchange offer?

Only holders of shares of P&G common stock will be entitled to tender their shares of P&G common stock in the exchange offer. Holders of P&G preferred stock would only be permitted to participate in the exchange offer if those shares are converted into shares of P&G common stock and tendered for exchange prior to completion of the exchange offer. The rights of participants in The Procter & Gamble Profit Sharing Trust and Employee Stock Ownership Plan to convert shares of P&G preferred stock or to participate in the exchange offer will be subject to the rules of the plan as well as the determination of the fiduciaries of the plan. A conversion of P&G preferred stock into shares of P&G common stock cannot be revoked for any reason, including if shares of P&G common stock received upon conversion are tendered and not accepted for exchange in the exchange offer.

 

6. Will holders of P&G stock options have the opportunity to exchange their P&G stock options for Galleria Company stock options in the exchange offer?

No. However, holders of vested and unexercised P&G stock options may be able to exercise their vested stock options in accordance with the terms of the plans under which the options were issued and tender the shares of P&G common stock received upon exercise in the exchange offer. An exercise of a P&G stock option cannot be revoked for any reason, including if shares of P&G common stock received upon exercise are tendered and not accepted for exchange in the exchange offer.

 

7. How many shares of Galleria Company common stock will I receive for each share of P&G common stock that I tender?

The exchange offer is designed to permit the exchange of shares of P&G common stock for shares of Galleria Company common stock at a discount of 7.0%, calculated as set forth in this prospectus, to the per-share equivalent value of Coty common stock. Stated another way, for each $1.00 of your shares of P&G common stock accepted in the exchange offer, you will receive approximately $1.075 of shares of Galleria

 

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Company common stock. The value of the shares of P&G common stock will be based on the Average P&G Stock Price and the value of the shares of Galleria Company common stock will be based on the Average Coty Stock Price. Please note, however, that:

 

    The number of shares you can receive is subject to an upper limit of 3.9033 shares of Galleria Company common stock for each share of P&G common stock accepted for exchange in the exchange offer. The next question and answer describes how this limit may impact the value of shares of Galleria Company common stock you receive.

 

    Because the exchange offer is subject to proration in the event of oversubscription, P&G may accept for exchange only a portion of the shares of P&G common stock tendered by you.

 

    Trading prices for P&G common stock and Coty common stock will fluctuate, including between the expiration of the Averaging Period and the Expiration Date, and there can be no assurance that the value of the shares of Coty common stock received in exchange for shares of P&G common stock will be higher than the discounted amount calculated for the exchange offer.

 

8. Is there a limit on the number of shares of Galleria Company common stock I can receive for each share of P&G common stock that I tender?

The number of shares you can receive is subject to an upper limit of 3.9033 shares of Galleria Company common stock for each share of P&G common stock accepted in the exchange offer. If the upper limit is in effect, you will receive less than $1.075 of shares of Galleria Company common stock for each $1.00 of shares of P&G common stock that you tender, and this difference could be significant. For example, if the Average P&G Stock Price was $88.30 (the highest closing price for P&G common stock on the NYSE during the twelve-month period prior to commencement of the exchange offer) and the Average Coty Stock Price was $21.79 (the lowest closing price for Coty common stock on the NYSE during that twelve-month period), the value of shares of Galleria Company common stock, based on the Average Coty Stock Price, received for shares of P&G common stock accepted for exchange would be approximately $0.963 for each $1.00 of shares of P&G common stock accepted for exchange.

P&G set the upper limit to ensure that a change in the relative price of P&G common stock and Coty common stock, whether as a result of an increase in the price of P&G common stock, a decrease in the price of Coty common stock or a combination thereof, would not result in an unduly high number of shares of Galleria Company common stock being exchanged for each share of P&G common stock accepted in the exchange offer, preventing a situation that might significantly reduce the benefits of the exchange offer to P&G and its continuing shareholders due to a smaller number of outstanding shares being acquired by P&G in the exchange offer.

 

9. How and when will I know the final exchange ratio and whether the upper limit is in effect?

The final exchange ratio used to determine the number of shares of Galleria Company common stock, and effectively the number of shares of Coty common stock, that you will receive for each share of P&G common stock accepted for exchange in the exchange offer will be announced at www.dfking.com/pg and separately by press release no later than 9:00 a.m., New York City time, on the trading day immediately preceding the Expiration Date. P&G will also announce at that time whether the upper limit on the number of shares of Galleria Company common stock that can be received for each share of P&G common stock tendered is in effect. After that time, you may also contact the Information Agent to obtain this information at its telephone numbers provided on the back cover of this prospectus.

 

10. Will indicative exchange ratios be available during the exchange offer?

Yes. P&G will maintain a website at www.dfking.com/pg that provides the daily VWAP of both P&G common stock and Coty common stock, together with indicative exchange ratios, during the exchange offer period. The indicative exchange ratios will be updated on the website each day by 4:30 p.m. New York City time.

 

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Prior to the Averaging Period, commencing on the third trading day of the exchange offer, indicative exchange ratios for each day will be calculated based on the simple arithmetic average of the daily VWAPs of P&G common stock and Coty common stock on the NYSE on each day, calculated as though that day were the last day of the three day Averaging Period for this exchange offer. In other words, assuming that a given day is a trading day, the indicative exchange ratio will be calculated based on the simple arithmetic average of the daily VWAPs of P&G common stock and Coty common stock on the NYSE for that day and the immediately preceding two trading days. The indicative exchange ratio will also reflect whether the upper limit on the exchange ratio, described above, would have been in effect.

During the Averaging Period, the indicative exchange ratios will be based on (1) on the first day of the Averaging Period, the daily VWAPs of P&G common stock and Coty common stock on the NYSE for that day, and (2) on the second day of the Averaging Period, the simple arithmetic average of the daily VWAPs of shares of P&G common stock and Coty common stock on the first and second day of the Averaging Period. No indicative exchange ratio will be published or announced on the third day of the Averaging Period. The final exchange ratio will be announced on the website and separately by press release no later than 9:00 a.m., New York City time, on the trading day immediately preceding the Expiration Date.

Indicative exchange ratios will also be available by contacting the Information Agent at the telephone numbers provided on the back cover of this prospectus, on each day of the exchange offer prior to the announcement of the final exchange ratio.

In addition, for purposes of illustration, a table that indicates the number of shares of Galleria Company common stock that you would receive per share of P&G common stock, calculated on the basis described above and taking into account the upper limit, assuming a range of averages of the daily VWAP of P&G common stock and Coty common stock on the valuation dates is provided under “The Exchange Offer—Terms of the Exchange Offer.”

 

11. How are the Average P&G Stock Price and the Average Coty Stock Price determined for purposes of calculating the number of shares of Galleria Company common stock to be received in the exchange offer?

The Average P&G Stock Price and the Average Coty Stock Price for purposes of the exchange offer will equal the simple arithmetic average of the daily VWAPs of shares of P&G common stock and Coty common stock on the NYSE during a period of three consecutive trading days (currently expected to be September 23, 2016, September 26, 2016 and September 27, 2016) ending on and including the second trading day preceding the Expiration Date. P&G will determine the calculations of the Average P&G Stock Price and Average Coty Stock Price, and that determination will be final.

 

12. What is the “daily volume-weighted average price” or “daily VWAP?”

The “daily volume-weighted average price” for shares of P&G common stock and shares of Coty common stock will be the volume-weighted average price of shares of P&G common stock and Coty common stock on the NYSE during the period beginning at 9:30 a.m., New York City time (or such other time as is the official open of trading on the NYSE), and ending at 4:00 p.m., New York City time (or such other time as is the official close of trading on the NYSE), except that such data will only take into account adjustments made to reported trades included by 4:10 p.m., New York City time. The daily VWAPs will be as reported by Bloomberg Finance L.P. and displayed under the heading Bloomberg VWAP on the Bloomberg pages “PG UN<Equity>VAP” with respect to shares of P&G common stock and “COTY UN<Equity>VAP” with respect to shares Coty common stock (or their equivalent successor pages if such pages are not available). The daily VWAPs provided by Bloomberg Finance L.P. may be different from other sources of volume-weighted average prices or investors’ or security holders’ own calculations of volume-weighted average prices.

 

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13. Why is the value for shares of Galleria Company common stock based on the trading prices for Coty common stock?

There currently is no trading market for shares of Galleria Company common stock, and no such trading market will be established in the future. P&G believes, however, that the trading prices for Coty common stock are an appropriate proxy for the trading prices for Galleria Company common stock because, among other factors, (1) prior to the Distribution, Galleria Company will issue to P&G a number of shares of Galleria Company common stock such that the total number of shares of Galleria Company common stock outstanding and held by P&G immediately prior to the Merger will be 409,726,299; (2) in the Merger, each holder of shares of Galleria Company common stock will receive the right to receive one share of Coty common stock for each share of Galleria Company common stock; and (3) at the start of the Averaging Period, it is expected that all the major conditions to the consummation of the Merger will have been satisfied (or will be expected to be satisfied) and the Merger will be expected to be consummated shortly thereafter, such that investors should be expected to be valuing shares of Coty common stock based on the expected value of such shares of Coty common stock after the Merger. However, there can be no assurance that shares of Coty common stock issued in the Merger will trade at the same prices at which shares of Coty common stock trade prior to the Merger. See “Risk Factors—Risks Relating to the Transactions—The trading prices for Coty common stock may not be an appropriate proxy for the prices of shares of Galleria Company common stock.”

 

14. What if the trading market in either shares of P&G common stock or shares of Coty common stock is disrupted on one or more days during the Averaging Period?

If a market disruption event occurs with respect to shares of P&G common stock or shares of Coty common stock on any day during the Averaging Period, both the Average P&G Stock Price and the Average Coty Stock Price will be determined using the daily VWAPs of shares of P&G common stock and shares of Coty common stock on the preceding trading day or days, as the case may be, on which no market disruption event occurred. If, however, P&G decides to extend the exchange offer period following a market disruption event, the Averaging Period will be reset. If a market disruption event occurs as specified above, P&G may terminate the exchange offer if, in its reasonable judgment, the market disruption event has impaired the benefits of the exchange offer for P&G. For specific information as to what would constitute a market disruption event, see “The Exchange Offer—Conditions for Completion of the Exchange Offer.”

 

15. Are there circumstances under which I would receive fewer shares of Galleria Company common stock, and therefore effectively fewer shares of Coty common stock, than I would have received if the exchange ratio were determined using the closing prices for P&G common stock and Coty common stock on the Expiration Date?

Yes. For example, if the trading price for P&G common stock were to increase during the last two trading days of the exchange offer period, the Average P&G Stock Price would likely be lower than the closing price for P&G common stock on the Expiration Date. As a result, you may receive fewer shares of Galleria Company common stock, and therefore effectively fewer shares of Coty common stock, for each $1.00 of shares of P&G common stock than you would have if the Average P&G Stock Price were calculated on the basis of the closing price for P&G common stock on the Expiration Date or on the basis of an Averaging Period that includes the last two trading days of the exchange offer period. Similarly, if the trading price for Coty common stock were to decrease during the last two trading days of the exchange offer period, the Average Coty Stock Price would likely be higher than the closing price for Coty common stock on the Expiration Date. This could also result in your receiving fewer shares of Galleria Company common stock, and therefore effectively fewer shares of Coty common stock, for each $1.00 of shares of P&G common stock than you would otherwise receive if the Average Coty Stock Price were calculated on the basis of the closing price for Coty common stock on the Expiration Date or on the basis of an Averaging Period that includes the last two trading days of the exchange offer period. See “The Exchange Offer—Terms of the Exchange Offer.”

 

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16. Will fractional shares of Galleria Company common stock and fractional shares of Coty common stock be distributed?

Fractional shares of Galleria Company common stock will be issued in the Distribution. The shares of Galleria Company common stock (including the fractional shares) will be held by the Exchange Agent for the benefit of P&G shareholders whose shares of P&G common stock are accepted in the exchange offer and, if the exchange offer is completed but not fully subscribed, a subsequent pro rata dividend of the Remaining Shares to the Remaining P&G Shareholders. Upon consummation of the Merger, each share of Galleria Company common stock will automatically convert into the right to receive one share of Coty common stock. No fractional shares of Coty common stock will be issued in the Merger to holders of fractional shares of Galleria Company common stock. In lieu of any fractional shares of Coty common stock, holders of fractional shares of Galleria Company common stock who would otherwise be entitled to receive such fractional shares of Coty common stock will be entitled to an amount in cash, without interest, equal to the holder’s pro rata portion of the net proceeds of the sale of fractional shares in the open market, which will occur no later than 20 business days after the completion of the Transactions, obtained by aggregating the fractional shares of Coty common stock otherwise allocable to the holders of fractional shares of Galleria Company common stock. The distribution of cash in lieu of fractional shares of Coty common stock will occur separate from, and subsequent to, the distribution of shares of Coty common stock.

 

17. What happens if P&G declares a quarterly dividend during the exchange offer?

If P&G declares a quarterly dividend and the record date for that dividend occurs during the exchange offer period, you will be eligible to receive that dividend if you continue to own your shares of P&G common stock as of that record date.

 

18. Will tendering my shares affect my ability to receive the P&G quarterly dividend?

Not until your shares are accepted for exchange upon completion of the exchange offer. If a dividend is declared by P&G with a record date before the completion of the exchange offer, you will be entitled to that dividend even if you tendered your shares of P&G common stock. Tendering your shares of P&G common stock in the exchange offer is not a disposition of those shares until they are accepted for exchange upon completion of the exchange offer. Shareholders will not be entitled to dividends declared with a record date after the completion of the exchange offer with respect to shares of P&G common stock accepted for exchange in the exchange offer.

 

19. What is the aggregate number of shares of Galleria Company common stock, and therefore effectively the aggregate number of shares of Coty common stock, being offered in the exchange offer?

P&G is offering 409,726,299 shares of Galleria Company common stock in the exchange offer, which will automatically convert into the right to receive 409,726,299 shares of Coty common stock upon consummation of the Merger.

 

20. What happens if more than the minimum amount of shares are tendered, but not enough shares of P&G common stock are tendered to allow P&G to exchange all of the shares of Galleria Company common stock it holds?

If the exchange offer is completed but is not fully subscribed, P&G will distribute all of the Remaining Shares in a subsequent pro rata dividend to the Remaining P&G Shareholders. Any P&G shareholder who validly tenders (and does not properly withdraw) shares of P&G common stock for shares of Galleria Company common stock in the exchange offer will waive its rights with respect to those tendered shares of P&G common stock to receive, and forfeit any rights to, any Remaining Shares distributed on a pro rata basis to the Remaining P&G Shareholders in the event the exchange offer is not fully subscribed. See “The Exchange Offer—Dividend and Distribution of Any Shares of Galleria Company Common Stock Remaining after Completion of the Exchange Offer.”

 

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21. What happens if the exchange offer is oversubscribed and P&G is unable to fulfill all tenders of shares of P&G common stock at the exchange ratio?

If, upon the expiration of the exchange offer, P&G shareholders have validly tendered more shares of P&G common stock than P&G is offering to accept for exchange (taking into account the exchange ratio and the total number of shares of Galleria Company common stock owned by P&G), P&G will limit the number of shares of P&G common stock that it accepts for exchange in the exchange offer through a proration process. Proration for each tendering P&G shareholder will be based on (1) the proportion that the total number of shares of P&G common stock to be accepted for exchange bears to the total number of shares of P&G common stock validly tendered and not properly withdrawn and (2) the number of shares of P&G common stock validly tendered and not properly withdrawn by that shareholder (rounded to the nearest whole number of shares of P&G common stock and subject to any adjustment necessary to ensure the exchange of all shares of Galleria Company common stock owned by P&G), except for tenders of odd-lots. Beneficial holders (other than plan participants in a P&G U.S. benefit plan) of fewer than 100 shares of P&G common stock who validly tender all of their shares will not be subject to proration if the exchange offer is oversubscribed. Beneficial holders of more than 100 shares of P&G common stock are not eligible for this preference. See “The Exchange Offer—Terms of the Exchange Offer—Proration; Tenders for Exchange by Holders of Fewer than 100 Shares of P&G Common Stock.”

 

22. How many shares of P&G common stock will P&G accept if the exchange offer is completed?

The number of shares of P&G common stock that will be accepted if the exchange offer is completed will depend on the final exchange ratio and the number of shares of P&G common stock validly tendered and not properly withdrawn. P&G is offering 409,726,299 shares of Galleria Company common stock in the exchange offer. Accordingly, the largest possible number of shares of P&G common stock that will be accepted would equal 409,726,299 divided by the final exchange ratio. For example, assuming that the final exchange ratio is 3.4550 (the current indicative exchange ratio based on the daily VWAPs of shares of P&G common stock and Coty common stock on August 29, 2016, August 30, 2016 and August 31, 2016), then P&G would accept up to a total of approximately 118,589,377 shares of P&G common stock.

 

23. Are there any conditions to P&G’s obligation to complete the exchange offer?

Yes. P&G’s obligation to complete the exchange offer will be subject to the satisfaction of certain conditions, including the satisfaction or waiver of specified conditions precedent to the completion of the Transactions as provided in the Transaction Agreement and other conditions set forth beginning on page 218 of this prospectus. P&G may elect not to complete the exchange offer prior to the time all of those conditions are satisfied or if any of those conditions are not satisfied. For example, P&G is not required to complete the exchange offer unless the number of shares of Galleria Company common stock that would be distributed in exchange for shares of P&G common stock validly tendered in the exchange offer and not properly withdrawn exceeds a specified percentage, currently expected to be approximately 86.1%, to be calculated based on the relative prices per share of Coty common stock and P&G common stock and the relative numbers of shares of Coty common stock and P&G common stock outstanding as of the Expiration Date (the “Minimum Condition”), provided that, at any time prior to the Expiration Date, P&G in its reasonable judgment and after consultation with Coty may reapply the agreed-upon formula used to calculate the Minimum Condition using updated information reflecting the then-current data or otherwise increasing the Minimum Condition by the minimum amount necessary, in each case, to ensure that the agreed-upon minimum amount of P&G common stock is tendered (the “Revised Minimum Condition”). P&G does not currently expect to waive any of the conditions to completion of the exchange offer. See “The Exchange Offer—Conditions for Completion of the Exchange Offer” and “The Transaction Agreement—Conditions to the Transactions.”

 

24. Will I be able to withdraw the shares of P&G common stock that I tender?

You have a right to withdraw all, some or none of your shares of P&G common stock you have tendered at any time prior to 12:00 midnight, New York City time, on the Expiration Date. See “The Exchange Offer—Terms of the Exchange Offer—Withdrawal Rights.” Given that the final exchange ratio used to determine the

 

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number of shares of Galleria Company common stock that you will receive for each share of P&G common stock accepted for exchange in the exchange offer will be announced by 9:00 a.m., New York City time, on the trading day immediately preceding the Expiration Date, you will be able to withdraw shares of P&G common stock tendered for two trading days after the final exchange ratio has been established. If you change your mind again before the expiration of the exchange offer, you can re-tender shares of P&G common stock by following the exchange procedures again prior to expiration of the exchange offer.

If you are a registered holder of P&G common stock (which includes persons holding certificated shares and shares in book-entry form through the DRS or the DSPP), you must provide a written notice of withdrawal or facsimile transmission of notice of withdrawal to the Exchange Agent. The information that must be included in that notice is specified under “The Exchange Offer—Terms of the Exchange Offer—Withdrawal Rights.”

If you hold your shares through a broker, dealer, commercial bank, trust company or similar institution, you should consult with that institution on the procedures you must comply with and the time by which such procedures must be completed in order for that institution to provide a written notice of withdrawal or facsimile transmission of notice of withdrawal to the Exchange Agent on your behalf prior to 12:00 midnight, New York City time, on the Expiration Date. If you hold your shares through such an institution, that institution must deliver the notice of withdrawal with respect to any shares you wish to withdraw. In such a case, as a beneficial owner and not a registered shareholder, you will not be able to provide a notice of withdrawal for such shares directly to the Exchange Agent.

 

25. When does the exchange offer expire?

The period during which you are permitted to tender your shares of P&G common stock in the exchange offer will expire at 12:00 midnight, New York City time, on September 29, 2016, unless the exchange offer is extended or earlier terminated.

 

26. Can the exchange offer be extended and under what circumstances?

Yes. P&G can extend the exchange offer at any time and from time to time. While a determination to extend the exchange offer is in P&G’s discretion, P&G has agreed with Coty that it will extend the exchange offer in specified circumstances. See “The Transaction Agreement—Distribution.”

For instance, the exchange offer may be extended if any of the conditions for completion of the exchange offer are not satisfied or waived prior to the expiration of the exchange offer. In case of an extension of the exchange offer, P&G will publicly announce the extension at www.dfking.com/pg and separately by press release no later than 9:00 a.m., New York City time, on the next business day following the previously scheduled Expiration Date. An extension will result in the resetting of the Averaging Period.

 

27. Will I receive delivery of shares of Galleria Company common stock?

No. Shares of Galleria Company common stock will not be transferred to you if you exchange any of your shares of P&G common stock for shares of Galleria Company common stock or if you are eligible to receive Remaining Shares in a subsequent pro rata dividend, if any. The Exchange Agent will cause such shares of Galleria Company common stock to be credited to records maintained by the Exchange Agent for the benefit of the respective holders. See “The Exchange Offer—Terms of the Exchange Offer—Book-Entry Accounts” and “The Exchange Offer—Dividend and Distribution of Any Shares of Galleria Company Common Stock Remaining after Completion of the Exchange Offer.” As promptly as practicable following completion of the exchange offer and, if the exchange offer is completed but is not fully subscribed, any subsequent pro rata dividend of the Remaining Shares to the Remaining P&G Shareholders, Merger Sub will merge with and into Galleria Company, with Galleria Company surviving the Merger and becoming a wholly owned subsidiary of Coty, and each share of Galleria Company common stock will be automatically converted into the right to receive one share of Coty common stock. As promptly as practicable following the Merger and P&G’s notice and determination of the final proration factor, if any, Coty’s transfer agent will credit the shares of Coty common stock, into which the shares of Galleria Company common stock have been converted, to book-entry accounts maintained for the benefit of the P&G shareholders who received shares of Galleria

 

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Company common stock in the exchange offer or as a subsequent pro rata dividend, if any, and will send these holders a statement evidencing their holdings of shares of Coty common stock.

 

28. Will I be able to sell my shares of Galleria Company common stock after the exchange offer is completed?

No. There currently is no trading market for shares of Galleria Company common stock, and no such trading market will be established in the future. You will not receive delivery of shares of Galleria Company common stock.

 

29. What are the material U.S. federal income tax consequences to P&G and P&G shareholders resulting from the Distribution, the Merger and Related Transactions?

Cadwalader, Wickersham & Taft LLP, special tax counsel to P&G, has delivered an opinion to the effect that, subject to the qualifications and limitations set forth therein, the (i) Galleria Transfer, taken together with the Distribution, should qualify as a tax-free reorganization pursuant to section 368(a)(1)(D) of the Code, (ii) Distribution, as such, should qualify as a distribution to P&G shareholders pursuant to section 355 of the Code, and (iii) Merger should not cause section 355(e) of the Code to apply to the Distribution. See “The Exchange Offer—Material U.S. Federal Income Tax Consequences of the Distribution, the Merger and Related Transactions.” In addition, the completion of the Distribution is conditioned upon P&G’s receipt of an opinion from Cadwalader, Wickersham & Taft LLP, special tax counsel to P&G, to the effect that the (i) Galleria Transfer, taken together with the Distribution, should qualify as a tax-free reorganization pursuant to section 368(a)(1)(D) of the Code, (ii) Distribution, as such, should qualify as a distribution to P&G shareholders pursuant to section 355 of the Code, and (iii) Merger should not cause section 355(e) of the Code to apply to the Distribution. It is a condition to the Distribution that such opinion not be withdrawn. The opinion will be based on, among other things, certain assumptions and representations as to factual matters and certain covenants made by P&G, Galleria Company, Coty and Merger Sub which, if incorrect or inaccurate in any material respect, could jeopardize the conclusions reached by special tax counsel in its opinion. The opinion will not be binding on the IRS or any court, and the IRS or a court may not agree with the opinion. None of P&G, Galleria Company, Coty or Merger Sub is currently aware of any facts or circumstances that would cause these assumptions and representations to be untrue or incorrect in any material respect that would preclude any of P&G, Galleria Company, Coty or Merger Sub from complying with all applicable covenants or that would otherwise jeopardize the conclusions reached by special tax counsel in its opinion. You should note that none of P&G, Galleria Company, Coty or Merger Sub intends to seek a ruling from the IRS as to the U.S. federal income tax treatment of the Transactions.

Based on the foregoing, P&G generally should recognize no taxable gain or loss, and include no amount in income, as a result of the Distribution, other than as a result of certain intercompany transactions, and no taxable gain or loss should be recognized by, and no amount included in the income of, P&G shareholders upon the receipt of shares of Galleria Company common stock in the exchange offer or, if the exchange offer is completed but is not fully subscribed, in a subsequent pro rata dividend of the Remaining Shares to the Remaining P&G Shareholders.

If, notwithstanding the receipt of an opinion of special tax counsel, the Galleria Transfer and the Distribution, taken together, fail to qualify as a reorganization under section 368(a)(1)(D) of the Code, and the Distribution fails to qualify as a distribution to P&G shareholders pursuant to section 355 of the Code, each P&G shareholder who receives shares of Galleria Company common stock in the Distribution would generally be treated as recognizing taxable gain equal to the difference between the fair market value of the shares of Galleria Company common stock received by the shareholder and such shareholder’s tax basis in the shares of P&G common stock exchanged therefor and/or receiving a taxable distribution equal to the fair market value of the shares of Galleria Company common stock received by the shareholder. P&G would generally recognize taxable gain equal to the excess of the fair market value of the assets contributed to Galleria Company plus liabilities assumed by Galleria Company, in each case, pursuant to the Galleria Transfer, over P&G’s tax basis in such assets.

 

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Even if the Galleria Transfer and the Distribution, taken together, generally qualify as a reorganization under section 368(a)(1)(D) of the Code and the Distribution generally qualifies as a distribution to P&G shareholders pursuant to section 355 of the Code, the Distribution would become taxable to P&G under section 355(e) of the Code if a 50% or greater interest (by vote or value) in P&G stock or Galleria Company stock were treated as acquired (including, in the latter case, through the acquisition of Coty stock in or after the Merger), directly or indirectly, by certain persons as part of a plan or series of related transactions that included the Distribution. Because P&G shareholders should be treated as owning more than 50% (by vote and value) of the shares of Coty common stock immediately following the Merger, the Merger, by itself, should not cause the Distribution to be taxable to P&G under section 355(e) of the Code. However, if the IRS were to determine that other acquisitions of P&G shares before the Distribution, or Coty shares after the Distribution, were part of a plan or series of related transactions that included the Distribution for purposes of section 355(e) of the Code, such determination could result in the recognition of gain by P&G under section 355(e) of the Code. While P&G generally would recognize gain as if it had sold the shares of Galleria Company common stock distributed to P&G shareholders in the Distribution for an amount equal to the fair market value of such stock, P&G has agreed under the Tax Matters Agreement among P&G, Galleria Company, Coty and Merger Sub to make a protective election under section 336(e) of the Code with respect to the Distribution which generally causes a deemed sale of Galleria Company’s assets upon a taxable Distribution. In such case, to the extent that P&G is responsible for the resulting transaction taxes, Coty generally would be required to make periodic payments to P&G equal to the tax savings arising from a “step up” in the tax basis of Galleria Company’s assets as a result of the protective election under section 336(e) of the Code taking effect.

The consummation of the Merger is conditioned on the receipt by P&G of a tax opinion from Cadwalader, Wickersham & Taft LLP, special tax counsel to P&G, and by Coty of a tax opinion from McDermott Will & Emery LLP, special tax counsel to Coty, in each case, to the effect that the Merger will qualify for U.S. federal income tax purposes as a reorganization within the meaning of section 368(a) of the Code. Accordingly, P&G shareholders who exchange their shares of Galleria Company common stock received in the Distribution for shares of Coty common stock in the Merger generally will, for U.S. federal income tax purposes, recognize no taxable gain or loss in the Merger, except for any taxable gain or loss attributable to the receipt of cash in lieu of fractional shares of Coty common stock. The opinions will rely on certain assumptions, including assumptions regarding the absence of changes in existing facts and law and the consummation of the Merger in the manner contemplated by the Transaction Agreement, and representations and covenants made by P&G, Galleria Company, Coty and Merger Sub, including representations contained in representation letters of officers of Coty and P&G. If any of those representations, covenants or assumptions is inaccurate in any material respect, the opinions may not be relied upon, and the U.S. federal income tax consequences of the Merger could differ significantly from those discussed herein. In addition, these opinions are not binding on the IRS or a court, and none of P&G, Galleria Company, Coty or Merger Sub intends to request a ruling from the IRS regarding the U.S. federal income tax consequences of the Transactions. Consequently, there can be no certainty that the IRS will not challenge the conclusions reflected in the opinions or that a court would not sustain such a challenge.

For further information concerning the U.S. federal income tax consequences of the Transactions, see “The Exchange Offer—Material U.S. Federal Income Tax Consequences of the Distribution, the Merger and Related Transactions.”

 

30. Are there any appraisal rights for holders of shares of P&G common stock?

There are no appraisal rights available to P&G shareholders in connection with the exchange offer.

 

31. What will P&G do with the shares of P&G common stock it accepts and what is the impact of the exchange offer on the number of shares of P&G common stock outstanding?

The shares of P&G common stock accepted by P&G in the exchange offer will be held as treasury stock. Any shares of P&G common stock accepted by P&G in the exchange offer will reduce the number of shares of P&G common stock outstanding.

 

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Questions and Answers About the Transactions

 

32. Why has P&G decided to separate P&G Beauty Brands from P&G?

P&G periodically evaluates its portfolio of businesses to assess the fit of each business within P&G. In August 2014, after consultation and discussion with the P&G Board in June 2014, P&G announced a plan to significantly streamline its product portfolio by divesting, discontinuing or consolidating approximately 100 non-strategic brands, resulting in a portfolio of approximately 65 brands. This portfolio optimization strategy is intended to narrow and refocus P&G’s portfolio to compete in categories and brands that are structurally attractive and that play to P&G’s strengths.

The Transactions represent a significant step forward in this strategy. P&G intends to separate P&G Beauty Brands to enable P&G to focus its management and financial resources on P&G’s continuing brands where P&G believes it can add more value, among other reasons. See “The Transactions—Background of the Transactions” for a discussion of the background of the Transactions. P&G’s goals for the Transactions are maximizing the value to P&G shareholders, minimizing P&G’s earnings per share dilution and effecting the separation of P&G Beauty Brands from P&G in a tax-efficient manner.

P&G and the P&G Board determined the Separation of P&G Beauty Brands pursuant to the Transactions to be in the best interests of P&G and its shareholders. The principal factors considered by P&G and the P&G Board in making the determination to effect the Separation and pursue the Transactions were:

 

    the relative sales, earnings and cash flow growth rates of P&G Beauty Brands and P&G’s other businesses;

 

    the belief that by separating P&G Beauty Brands as part of its portfolio optimization strategy, P&G would benefit from a greater focus on businesses that more directly leverage P&G’s core competencies in innovation, branding, go-to-market, and consumer understanding;

 

    the belief, based on the relative past performances of P&G Beauty Brands, that the Transactions would provide a superior value to P&G shareholders upon completion of the Transactions than either retaining P&G Beauty Brands or disposing of P&G Beauty Brands to other bidders, in part due to the expectation that the Transactions should result in a tax-efficient disposition of P&G Beauty Brands for P&G and its shareholders versus a sale of P&G Beauty Brands for cash, which would result in a taxable disposition for P&G;

 

    the expectation, based on the relative past performances of P&G Beauty Brands, that divesting P&G Beauty Brands pursuant to the Transactions would result in stronger future earnings per share growth for P&G;

 

    the belief that the expected timing and ability to effectively execute the Transactions would be satisfactory relative to P&G’s portfolio focus goals; and

 

    the ability of management of each of P&G and P&G Beauty Brands to concentrate on the expansion and growth of their respective businesses following the Transactions, allowing each to pursue the development strategies most appropriate to its respective operations.

 

33. How is Galleria different from P&G Beauty Brands?

P&G will transfer to Galleria Company certain assets relating to P&G Beauty Brands, including certain subsidiaries of P&G. Galleria Company will also assume certain liabilities associated with P&G Beauty Brands. These assets and liabilities, which will not include assets and liabilities exclusively relating to the Excluded Brands (the fragrance licenses of Dolce & Gabbana and Christina Aguilera, the latter of which was acquired by Elizabeth Arden, Inc. on July 29, 2016), are referred to in this prospectus as “Galleria.”

 

34. What will happen in the Transactions?

Below is a summary of the key steps of the Transactions. A step-by-step description of material events relating to the Transactions is set forth under “The Transactions.” The section entitled “Selected Historical and

 

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Pro Forma Financial Data—Unaudited Condensed Combined Pro Forma Financial Statements of Coty” includes information regarding the Galleria assets and liabilities to be transferred and indebtedness expected to be incurred under the Galleria Senior Secured Credit Facilities as if the Transactions had occurred as of the respective dates identified therein.

 

    P&G will transfer the Galleria assets to Galleria Company. Galleria Company will also assume liabilities associated with the Galleria assets.

 

    Prior to the Distribution, and in partial consideration for the Galleria assets transferred from P&G to Galleria Company, Galleria Company will be recapitalized in the following manner:

 

    Galleria Company will issue and deliver to P&G a number of additional shares of Galleria Company common stock such that P&G will hold a total of 409,726,299 shares of Galleria Company common stock at the time of the Distribution, which is the Galleria Stock Amount (as defined below), all of which shares of Galleria Company common stock P&G will dispose of in the Distribution.

Under the Transaction Agreement, the “Galleria Stock Amount” was calculated on the last practicable date prior to the commencement of the exchange offer and is the product of (i) thirteen twelfths (13/12) and (ii) the sum of (A) the aggregate number of shares of Coty common stock and Coty series A preferred stock that were outstanding on the date of calculation, including any shares of Coty common stock repurchased by Coty between August 13, 2015 and the 30th day prior to the commencement date of the exchange offer, and (B) the aggregate number of shares of Coty common stock issuable pursuant to options, warrants, rights, subscriptions, claims of any character, agreements, obligations, convertible or exchangeable securities, or other commitments, contingent or otherwise pursuant to which Coty is or may become obligated to issue shares of any of Coty’s capital stock (other than Coty series A preferred stock) and any securities convertible into, exchangeable for, or evidencing the right to subscribe for, any Coty capital stock (other than Coty Series A preferred stock) that was outstanding on the date of calculation (including restricted stock units, phantom units, options and any shares of Coty class B common stock that will be converted into Coty common stock), whether contingent, vested or unvested, or otherwise (without giving effect to any “cashless exercise” or similar features); and

 

    Galleria Company will use all or a portion of the loans incurred prior to the consummation of the Merger under the Galleria Senior Secured Credit Facilities, along with any cash contributed by P&G, to purchase or otherwise receive the Galleria assets from P&G or its subsidiaries. Galleria Company will distribute to P&G, prior to the Distribution, any borrowed amounts remaining after funding these asset purchases.

 

    JAB Cosmetics B.V., the holder of all outstanding shares of Coty class B common stock, will, subject to satisfaction or waiver of the conditions to closing of the Merger set forth in the Transaction Agreement (other than those conditions that by their nature or pursuant to the terms of the Transaction Agreement are to be satisfied at or immediately prior to the closing), irrevocably elect, no later than two business days prior to the closing of the Merger, to convert its shares of Coty class B common stock into shares of Coty common stock. Following this conversion, Coty common stock will be Coty’s only class of common stock outstanding. Following this conversion and the completion of the Transactions, JAB Cosmetics B.V. will remain Coty’s largest stockholder overall, owning approximately 36% of the fully diluted shares of Coty common stock.

 

    P&G will offer to P&G shareholders the right to exchange all or a portion of their shares of P&G common stock for shares of Galleria Company common stock in the exchange offer.

If the exchange offer is completed but is not fully subscribed, the Exchange Agent will calculate the exact number of Remaining Shares to be distributed as a pro rata dividend to the Remaining P&G Shareholders, and P&G will distribute the Remaining Shares immediately thereafter.

 

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The Exchange Agent will hold, for the account of the relevant P&G shareholders, the global certificate(s) representing all of the outstanding shares of Galleria Company common stock, pending the consummation of the Merger. Shares of Galleria Company common stock will not be traded during this period.

 

    As promptly as practicable following the completion of the Distribution, Merger Sub will merge with and into Galleria Company, with Galleria Company surviving the Merger and becoming a wholly owned subsidiary of Coty.

 

    Each share of Galleria Company common stock will be automatically converted into the right to receive one share of Coty common stock.

 

    The payment of indebtedness under the Galleria Senior Secured Credit Facilities will initially be guaranteed by all existing and future direct and indirect material domestic subsidiaries of Galleria Company, subject to certain exceptions, and after the consummation of the Merger and to the extent the requirements of the Transaction Agreement are satisfied, will also be guaranteed by Coty and all subsidiaries of Coty that guarantee the indebtedness under the Coty Senior Secured Credit Facilities.

 

    The fully diluted shares of Coty common stock immediately prior to the Merger are expected to represent approximately 46% of the fully diluted shares of Coty common stock immediately after the Merger, and the shares of Coty common stock issued in connection with the conversion of shares of Galleria Company common stock in the Merger are expected to represent approximately 54% of the fully diluted shares of Coty common stock immediately after the Merger.

In connection with the Transactions, P&G and Coty have entered into various agreements, and P&G, Coty, Galleria Company and Merger Sub will enter into additional agreements, establishing the terms of the Separation. These agreements include a transition services agreement in which P&G will agree to provide certain services to Galleria Company and Coty for a limited period of time following the Transactions. See “Additional Agreements.”

 

35. What are the main ways that the relationship between Galleria Company and P&G will change after the Transactions are completed?

Following the Transactions, Galleria Company will no longer be a subsidiary of P&G; instead, Merger Sub will merge with and into Galleria Company, with Galleria Company surviving the Merger and becoming a wholly owned subsidiary of Coty. In connection with the Transactions, P&G, Coty, Galleria Company and Merger Sub will enter into several ancillary agreements and a transition services agreement governing the provision of certain services by P&G to Galleria Company and Coty for a limited period of time following the Transactions. See “Additional Agreements.”

 

36. What is the current relationship between Galleria Company and Coty?

Galleria Company is currently a wholly owned subsidiary of P&G and was incorporated as a Delaware corporation in order to effect the Separation of Galleria from P&G. Other than in connection with the Transactions, there is currently no relationship between Galleria Company and Coty.

 

37. What will Coty stockholders receive in the Merger?

Coty stockholders will not directly receive any consideration in the Merger. All shares of Coty common stock issued and outstanding immediately before the Merger will remain issued and outstanding after consummation of the Merger. JAB Cosmetics B.V., the holder of all outstanding shares of Coty class B common stock, will irrevocably elect to convert its shares of Coty class B common stock into shares of Coty common stock, which conversion will be effective no later than two business days prior to the closing of the Merger. Following this conversion, Coty common stock will be Coty’s only class of common stock outstanding. Following this conversion and the completion of the Transactions, JAB Cosmetics B.V. will remain Coty’s largest stockholder, owning approximately 36% of the fully diluted shares of Coty common stock.

Immediately after the Merger, Coty stockholders will continue to own shares in Coty, and Coty will own Galleria, which will be owned and operated though Galleria Company as a wholly owned subsidiary of Coty.

 

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38. Are there possible adverse effects on the value of Coty common stock ultimately to be received by P&G shareholders who participate in the exchange offer?

The exchange offer is designed to permit P&G shareholders to exchange their shares of P&G common stock for a number of shares of Galleria Company common stock that corresponds to a 7.0% discount, calculated as set forth in this prospectus, to the per-share equivalent value of Coty common stock. The existence of a discount, along with the issuance of shares of Coty common stock pursuant to the Merger and the conversion of Coty class B common stock into shares of Coty common stock, may negatively affect the market price of Coty common stock. Further, the indebtedness incurred under the Galleria Senior Secured Credit Facilities in connection with the Separation will initially be guaranteed by all existing and future direct and indirect material domestic subsidiaries of Galleria Company, subject to certain exceptions, and after the consummation of the Merger and to the extent the requirements of the Transaction Agreement are satisfied, will also be guaranteed by Coty and all subsidiaries of Coty that guarantee the indebtedness under the Coty Senior Secured Credit Facilities. This additional indebtedness could materially and adversely affect the liquidity, results of operations and financial condition of Coty. Coty also expects to incur significant one-time costs in connection with the Transactions, which may have an adverse impact on Coty’s liquidity, results of operations and financial condition in the periods in which they are incurred. In addition, Coty’s management will be required to devote a significant amount of time and attention to the process of integrating the operations of Coty’s business and Galleria. If Coty’s management is not able to manage the integration process effectively, or if any significant business activities are interrupted as a result of the integration process, Coty’s business could suffer and its stock price may decline. See “Risk Factors” for a further discussion of material risks associated with the Transactions.

 

39. How will the Transactions impact the future liquidity and capital resources of Coty?

The indebtedness incurred under the Galleria Senior Secured Credit Facilities will initially be guaranteed by all existing and future direct and indirect material domestic subsidiaries of Galleria Company, subject to certain exceptions, and after consummation of the Merger will also be guaranteed by Coty and all subsidiaries of Coty that guarantee the indebtedness under the Coty Senior Secured Credit Facilities. In addition, in connection with the Transactions, Coty has refinanced its existing debt. Coty anticipates that its primary sources of liquidity after the Transactions will be cash provided by operations and supplemented by borrowings from third-party lenders.

 

40. Are there any conditions to the completion of the Transactions?

Yes. The completion of the Transactions is subject to a number of conditions, including:

 

    the completion of the Separation and Distribution;

 

    the satisfaction of the Minimum Condition or the Revised Minimum Condition, as applicable;

 

    the conversion of all outstanding shares of Coty’s class B common stock into shares of Coty common stock;

 

    the receipt of written tax opinions from special tax counsel to P&G and special tax counsel to Coty; and

 

    other customary conditions.

The Transaction Agreement provides that either P&G or Coty may terminate the Transaction Agreement if the Merger is not consummated on or before January 31, 2017.

These conditions are described in more detail under “The Exchange Offer—Conditions for Completion of the Exchange Offer” and “The Transaction Agreement—Conditions to the Transactions.”

 

41. When will the Transactions be completed?

The Transactions are expected to be completed as soon as practicable following completion of the exchange offer. However, it is possible that factors outside P&G’s and Coty’s control could require the parties to complete

 

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the Transactions at a later time or not complete them at all. See “The Transaction Agreement—Conditions to the Transactions” for a discussion of the conditions to the completion of the Transactions.

 

42. Are there risks associated with the Transactions?

Yes. You should consider all of the information included or incorporated by reference in this prospectus, including the factors described under the heading “Risk Factors.” You are strongly encouraged to read this prospectus carefully and in its entirety. The risks include, among others, the possibility that Coty may fail to realize the anticipated benefits of the Transactions, the uncertainty that Coty will be able to integrate Galleria successfully and the possibility that Coty may be unable to provide benefits and services or access to equivalent financial strength and resources to Galleria that P&G has historically provided to P&G Beauty Brands.

 

43. What shareholder approvals are needed in connection with the Transactions?

Holders representing more than a majority of the voting power of Coty have approved, by written consent, the issuance of shares of Coty common stock in connection with the Transactions. Coty will file a definitive information statement on Schedule 14C with the SEC that relates to such written consent. No further approval of Coty stockholders is required or being sought in connection with the Transactions. No vote of P&G shareholders is required or being sought in connection with the Transactions. Additionally, P&G as the sole shareholder of Galleria Company, and subject to satisfaction of the conditions set out in the Transaction Agreement, will approve the Merger prior to the Distribution.

 

44. Where will the shares of Coty common stock issued in the Merger be listed?

Shares of Coty common stock are, and the shares of Coty common stock to be issued in the Merger will be, listed on the NYSE under the symbol “COTY.”

 

45. What are the significant differences between the rights of shareholders of P&G, which is an Ohio corporation, and stockholders of Coty, which is a Delaware corporation?

P&G is an Ohio corporation and Coty is a Delaware corporation, and each is subject to the different laws and rules of their respective states of incorporation as well as different organizational documents. Holders of P&G common stock, whose rights are currently governed by Ohio law and P&G’s organizational documents, will, with respect to the shares of P&G common stock validly tendered and exchanged immediately following the exchange offer, become Coty stockholders and their rights with respect to the shares of Coty common stock will be governed by Delaware law and Coty’s organizational documents. The significant differences between the rights associated with P&G common stock and Coty common stock relate to, among other things, shareholder action by written consent, removal of directors, advance notice procedures for shareholder proposals or director nominations, control share acquisitions and approval of certain business combinations. For a further discussion of the material differences between the rights of holders of P&G common stock and Coty common stock, see the section entitled “Comparison of Shareholder Rights.”

 

46. Where can I find more information about P&G, Galleria Company, Coty and the Transactions?

You can find out more information about P&G, Galleria Company, Coty and the Transactions by reading this prospectus and, with respect to P&G and Coty, from various sources described in “Where You Can Find More Information; Incorporation by Reference” beginning on page 255.

 

47. Whom should I contact if I have questions about the Transactions or the exchange offer?

To find out more information about the Transactions or the exchange offer, or to request additional copies of this prospectus or other documents relating to the Transactions or the exchange offer without charge, please call D.F. King & Co., Inc., the Information Agent for the exchange offer, at (212) 269-5550 (for banks and brokers) and (877) 297-1747 (for all other callers). You can also write to D.F. King & Co., Inc. at 48 Wall Street, New York, New York 10005.

 

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SUMMARY

Unless otherwise stated in this prospectus or the context otherwise provides, the description of Galleria Company, Galleria and P&G Beauty Brands contained in this prospectus is based on the assumption that the transferred assets and liabilities of P&G Beauty Brands to be acquired by Coty (which are referred to in this prospectus as “Galleria”) had been held by Galleria Company for all of the periods discussed. The following summary contains certain information from this prospectus. It does not contain all the details concerning the Transactions, including information that may be important to you. To better understand the Transactions, you should carefully review this entire prospectus and the documents to which it refers. See “Where You Can Find More Information; Incorporation by Reference.”

The fiscal year of each of P&G, Galleria Company and Coty begins on July 1 and ends on the following June 30. For example, P&G’s “fiscal 2016” began on July 1, 2015 and ended on June 30, 2016.

The Parties to the Transactions

Coty Inc.

Coty Inc.

350 Fifth Avenue

New York, New York 10118

(212) 389-7300

Coty Inc., a Delaware corporation referred to in this prospectus as Coty, is a leading global beauty company. Founded in Paris in 1904, Coty is a pure play beauty company with a portfolio of well-known brands that compete in the four segments in which Coty operates: Fragrances, Color Cosmetics, Skin & Body Care and Brazil Acquisition. Coty currently holds the #2 global position in fragrances, the #4 global position in color cosmetics and has a strong regional presence in skin & body care. Coty’s top 10 brands, which Coty refers to as its “power brands,” generated 70% of its net revenues in fiscal 2016 and comprise the following globally recognized brands: adidas, Calvin Klein, Chloé, DAVIDOFF, Marc Jacobs, OPI, philosophy, Playboy, Rimmel and Sally Hansen. Coty’s brands compete in all key distribution channels across both prestige and mass markets and in over 130 countries and territories. The following is a discussion of Coty prior to the consummation of the Merger. For a discussion of the combined company following the Transactions see “—Business Strategies After the Transactions.”

Coty has transformed itself into a multi-segment beauty company with market leading positions in both North America and Europe through new product offerings, diversified sales channels and its global growth strategy. Today, Coty’s business has a diversified revenue base that generated net revenues in fiscal 2016 of 46%, 36%, 16% and 2% from Fragrances, Color Cosmetics, Skin & Body Care and Brazil Acquisition, respectively.

For the fiscal years ended June 30, 2016 and 2015, Coty had $4.349 billion and $4.395 billion of net revenues, respectively, and generated operating income of $254.2 million and $395.1 million, respectively.

Green Acquisition Sub Inc.

Green Acquisition Sub Inc.

c/o Coty Inc.

350 Fifth Avenue

New York, New York 10118

(212) 389-7300

 



 

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Green Acquisition Sub Inc., a Delaware corporation referred to in this prospectus as Merger Sub, is a wholly owned subsidiary of Coty that was organized on June 23, 2015 specifically for the purpose of completing the Merger. Merger Sub has engaged in no business activities to date and it has no material assets or liabilities of any kind, other than those incident to its formation and in connection with the Transactions.

The Procter & Gamble Company

The Procter & Gamble Company

One Procter & Gamble Plaza

Cincinnati, Ohio 45202

(513) 983-1100

The Procter & Gamble Company, an Ohio corporation referred to in this prospectus as P&G, is focused on providing branded consumer packaged goods of superior quality and value to improve the lives of the world’s consumers. P&G was incorporated in Ohio in 1905, having been built from a business founded in 1837 by William Procter and James Gamble. Today, P&G sells its products in more than 180 countries and territories, including brands such as Always, Ambi Pur, Ariel, Bounty, Charmin, Crest, Dawn, Downy, Fairy, Febreze, Gain, Gillette, Head & Shoulders, Lenor, Olay, Oral-B, Pampers, Pantene, SK-II, Tide, Vicks and Whisper. As of June 30, 2016, P&G owned and operated 24 manufacturing sites located in 18 different states or territories in the United States and 97 manufacturing facilities in 38 other countries. Many of the domestic and international sites manufacture products for multiple businesses.

For the fiscal years ended June 30, 2016 and 2015, P&G had net sales of $65.299 billion and $70.749 billion, respectively, and operating income of $13.441 billion and $11.049 billion, respectively.

Galleria Co.

Galleria Co.

c/o The Procter & Gamble Company

One Procter & Gamble Plaza

Cincinnati, Ohio 45202

(513) 983-1100

Galleria Co., a Delaware corporation referred to in this prospectus as Galleria Company, is a wholly owned subsidiary of P&G organized on June 25, 2015 for the purpose of effecting the Separation of Galleria from P&G. Galleria Company has no material assets or liabilities of any kind other than those incident to its formation and those acquired or incurred in connection with the Transactions.

P&G Beauty Brands and Galleria

P&G Beauty Brands

P&G Beauty Brands refers to the business of P&G and its subsidiaries relating to P&G’s global fine fragrances, salon professional, cosmetics and retail hair color businesses, along with select hair styling brands, that, except for the Excluded Brands as described below, will be transferred by P&G and its subsidiaries to Galleria Company as part of the Separation.

P&G Beauty Brands includes several global brands, including Clairol Nice ‘n Easy, CoverGirl, HUGO BOSS, Gucci, Lacoste, Max Factor, Wella Koleston and Wella Professional. P&G Beauty Brands was mainly established from P&G’s acquisition of the Noxell Corporation in 1989, the tradename purchase of Max Factor in 1991, the acquisition of Clairol in 2001, the acquisition of Wella AG in September 2003 and other subsequent brand and license acquisitions. As it relates to licenses, P&G Beauty Brands maintains agreements with the owner of the brands, most of which involve the payment of royalties tied to the sales of the underlying brands.

 



 

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For the fiscal years ended June 30, 2016 and 2015, P&G Beauty Brands generated combined net sales of $4.911 billion and $5.518 billion, respectively, and operating income of $188 million and $414 million, respectively.

Galleria

The assets and liabilities of P&G Beauty Brands that will be transferred to Galleria Company are referred to in this prospectus as “Galleria.” These assets and liabilities exclude the fragrance licenses of Dolce & Gabbana and Christina Aguilera, which are referred to in this prospectus as the “Excluded Brands” and will not transfer in the Transactions. In addition, P&G Beauty Brands’ historical results include certain fine fragrance brands, including Rochas, Laura Biagiotti, Naomi Campbell and Giorgio Beverly Hills, which were divested by P&G in May 2015, June 2015, September 2014 and February 2016, respectively, as well as Puma, which was discontinued in fiscal 2015. These licenses are referred to in this prospectus as the “Divested Brands.” P&G intends to fully exit the fine fragrance business; it is in the process of exiting the Dolce & Gabbana fragrance license and it exited the Christina Aguilera fragrance license in July 2016. Activities related to the Excluded Brands and the Divested Brands collectively accounted for $506 million of P&G Beauty Brands’ net sales and $91 million of P&G Beauty Brands’ net income for the fiscal year ended June 30, 2016. The net income related to the Excluded Brands and the Divested Brands does not reflect a Dolce & Gabbana intangible asset impairment charge of $42 million and a termination fee of $73 million relating to that brand license. Coty anticipates a negative impact to the profitability of the Galleria business as a result of excluding the Excluded Brands because certain Fine Fragrance divisional costs in the Excluded Brands results will transfer with the Galleria business as a part of the Merger.

Brands

P&G Beauty Brands has four operating segments comprised of: (i) Fine Fragrances, (ii) Salon Professional, (iii) Retail Hair Color & Styling and (iv) Cosmetics. Under GAAP, the businesses underlying the four operating segments are aggregated into three reportable segments comprised of: (i) Fine Fragrances, (ii) Salon Professional and (iii) Retail Hair & Cosmetics. Below is a summary of P&G Beauty Brands’ brands as of June 30, 2016 across its four operating segments:

 

Fine Fragrances(1)        Salon Professional        

Retail Hair Color &

Styling

        Cosmetics

HUGO BOSS

Gucci

Lacoste

Alexander McQueen

Stella McCartney

James Bond

Bruno Banani

Gabriela Sabatini

Mexx

Escada

Dolce & Gabbana*

Christina Aguilera*†

    

Wella Professionals

Sebastian

Nioxin

Clairol Professional

System Professional

Londa Professional

Kadus Professional Color Charm Sassoon Professional**

     

Wella (and derivatives)

Londa

Londa Trend

Clairol

Blondor

Koleston

Miss Clairol

Soft Color

Natural Instincts

Nice ‘n Easy

L’image

Bellady

Balsam Color

Shockwaves

New Wave Design

Silvikrin

Wellaton

Welloxon

VS Salonist**

VS Pro-Series Color**

     

CoverGirl

Max Factor (excluding Max Factor Gold)

 

(1) Fine Fragrances brands are licensed to P&G by third parties.
*

Denotes Excluded Brand.

 



 

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** Denotes brand ownership of which will be retained by P&G but to which Coty will be granted a perpetual, royalty-free license.
Acquired by Elizabeth Arden, Inc. on July 29, 2016.

On July 29, 2016, Elizabeth Arden, Inc. acquired the global license for the Christina Aguilera fine fragrance brand from P&G. On June 30, 2016, Dolce & Gabbana and the Shiseido Group announced the signing of a worldwide license agreement for the development, manufacturing and distribution of the Dolce & Gabbana fine fragrance business. P&G will transition out of the Dolce & Gabbana brand license upon the effectiveness of the new Dolce & Gabbana license agreement, which is expected to occur prior to or concurrent with the expected closing of the Transactions (subject to applicable antitrust authorities’ clearance).

The Transactions

On July 9, 2015, Coty and P&G announced that they had entered into a Transaction Agreement, which provides for a business combination involving P&G, Galleria Company, Coty and Merger Sub. In the Transactions contemplated by the Transaction Agreement, P&G will transfer Galleria, which represents a subset of the assets and liabilities of P&G Beauty Brands, to Galleria Company. Prior to the Distribution, Galleria Company is expected to be recapitalized by (1) issuing and delivering to P&G a number of additional shares of Galleria Company common stock such that the total number of shares of Galleria Company common stock held by P&G at the time of the Distribution will equal 409,726,299, all of which shares of Galleria Company common stock P&G will dispose of in the Distribution, (2) incurring indebtedness under the Galleria Senior Secured Credit Facilities and (3) using all or a portion of the cash proceeds from the indebtedness incurred under the Galleria Senior Secured Credit Facilities, along with any cash contributed by P&G to Galleria Company, to purchase or otherwise receive the Galleria assets from P&G or its subsidiaries. Galleria Company will distribute to P&G, prior to the Distribution, any borrowed amounts remaining after funding these asset purchases.

On the closing date of the Distribution, P&G will distribute shares of Galleria Company common stock to P&G shareholders whose shares of P&G common stock are accepted for exchange in the exchange offer. If the exchange offer is completed but is not fully subscribed, P&G will distribute all of the Remaining Shares as a subsequent pro rata dividend to the Remaining P&G Shareholders. At or prior to the completion of the exchange offer, P&G will irrevocably deliver to the Exchange Agent all of the shares of Galleria Company common stock outstanding, with irrevocable instructions to hold the shares of Galleria Company common stock for the benefit of P&G shareholders whose shares of P&G common stock are accepted for exchange in the exchange offer and, in the case of a subsequent pro rata dividend, the Remaining P&G Shareholders. If there is a subsequent pro rata dividend to be distributed, the Exchange Agent will calculate the exact number of Remaining Shares to be distributed as a pro rata dividend to the Remaining P&G Shareholders, and P&G will distribute the Remaining Shares immediately thereafter.

As promptly as practicable following the completion of the Distribution, Merger Sub will merge with and into Galleria Company, with Galleria Company surviving the Merger and becoming a wholly owned subsidiary of Coty. In connection with the Merger, the shares of Galleria Company common stock distributed in connection with the Distribution will automatically convert into the right to receive shares of Coty common stock on a one-for-one basis and the right to receive cash in lieu of any fractional shares. See “The Transactions” and “The Transaction Agreement.”

Coty will issue 409,726,299 shares of Coty common stock in the Merger. Based upon the reported closing price of $26.95 per share for Coty common stock on the NYSE on August 31, 2016, the last NYSE trading day prior to the date of this prospectus, the total value of the consideration to be paid by Coty in the Transactions, including the proceeds from the loans under the Galleria Senior Secured Credit Facilities, would have been approximately $12.9 billion. The value of the consideration to be paid by Coty will depend on the market price of shares of Coty common stock at the time of determination.

 



 

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After the Merger, Coty, through Galleria Company, its wholly owned subsidiary, will own and operate Galleria and will also continue its current businesses. Coty will continue to use the name “Coty Inc.” after the Merger. Shares of Coty common stock are, and the shares of Coty common stock to be issued in the Merger will be, listed on the NYSE under the symbol “COTY.”

Below is a step-by-step description of the sequence of material events relating to the Transactions.

 

Step 1    Separation
   P&G will transfer Galleria, which represents a subset of the assets and liabilities of P&G Beauty Brands, to Galleria Company.
Step 2    Galleria Company Recapitalization
   Prior to the Distribution, and in partial consideration for the Galleria assets transferred from P&G to Galleria Company, Galleria Company will be recapitalized in the following manner:
  

•    Galleria Company will issue and deliver to P&G a number of additional shares of Galleria Company common stock such that P&G will hold a total of 409,726,299 shares of Galleria Company common stock at the time of the Distribution, which is the Galleria Stock Amount calculated as of the last practicable date prior to the commencement date of the exchange offer, all of which shares of Galleria Company common stock P&G will dispose of in the Distribution; and

  

•    Galleria Company will use all or a portion of the proceeds of the indebtedness incurred on or prior to the Recapitalization Date under the Galleria Senior Secured Credit Facilities, along with any cash contributed by P&G, to purchase or otherwise receive the Galleria assets from P&G or its subsidiaries. Galleria Company will distribute to P&G, prior to the Distribution, any borrowed amounts remaining after funding these asset purchases.

Step 3    Conversion of Coty Class B Common Stock
   JAB Cosmetics B.V., the holder of all outstanding shares of Coty class B common stock, will, subject to satisfaction or waiver of the conditions to closing of the Merger set forth in the Transaction Agreement (other than those conditions that by their nature or pursuant to the terms of the Transaction Agreement are to be satisfied at or immediately prior to the closing), irrevocably elect, no later than two business days prior to the closing of the Merger, to convert its shares of Coty class B common stock into shares of Coty common stock. Following this conversion, Coty common stock will be Coty’s only class of common stock outstanding. Following this conversion and the completion of the Transactions, JAB Cosmetics B.V. will remain Coty’s largest stockholder, owning approximately 36% of the fully diluted shares of Coty common stock.
Step 4    Distribution—Exchange Offer
   P&G will offer to P&G shareholders the right to exchange all or a portion of their shares of P&G common stock for shares of Galleria Company common stock in the exchange offer.
   If the exchange offer is completed but is not fully subscribed, the Exchange Agent will calculate the exact number of Remaining Shares to be distributed as a pro rata dividend to the Remaining P&G Shareholders, and P&G will distribute the Remaining Shares immediately thereafter.

 



 

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   The Exchange Agent will hold, for the account of the relevant P&G shareholders, the global certificate(s) representing all of the outstanding shares of Galleria Company common stock, pending the consummation of the Merger. Shares of Galleria Company common stock will not be traded during this period.
Step 5    Merger
   As promptly as practicable following the completion of the Distribution, Merger Sub will merge with and into Galleria Company, with Galleria Company surviving the Merger and becoming a wholly owned subsidiary of Coty. Each share of Galleria Company common stock will be automatically converted into the right to receive one share of Coty common stock.

After completion of the steps mentioned above, the fully diluted shares of Coty common stock immediately prior to the Merger, including shares of Coty common stock held by JAB Cosmetics B.V. as a result of the conversion of its shares of Coty class B common stock into Coty common stock, are expected to represent approximately 46% of the fully diluted shares of Coty common stock immediately after the Merger, and the shares of Coty common stock issued in connection with the conversion of shares of Galleria Company common stock in the Merger are expected to represent approximately 54% of the fully diluted shares of Coty common stock immediately after the Merger. See “The Transactions—Number of Shares of Galleria Company Common Stock to be Distributed to P&G Shareholders.”

After consummation of the Merger and the other steps mentioned above, Galleria, comprised of P&G Beauty Brands other than the Excluded Brands, will be owned and operated by Coty through Galleria Company, its wholly owned subsidiary. In addition, to the extent the requirements of the Transaction Agreement are satisfied, Coty and all subsidiaries of Coty that guarantee the indebtedness under the Coty Senior Secured Credit Facilities, as well as all existing and future direct and indirect material domestic subsidiaries of Galleria Company, subject to certain exceptions, will guarantee the obligations under the Galleria Senior Secured Credit Facilities.

Various factors were considered by Coty and P&G in negotiating the terms of the Transactions, including the equity ownership levels of Coty stockholders and current and former P&G shareholders receiving shares of Coty common stock in the Distribution. The principal factors considered by the parties negotiating the allocation of equity ownership following the Transactions were the impact of such allocation on the desired tax-free nature of the Transactions, the effects of the Separation on P&G and its shareholders, the relative actual results of operations of Coty and P&G Beauty Brands, the opportunities expected to be obtained from combining Coty and P&G Beauty Brands and the enhancements to Coty’s strategic global growth objectives as a result of acquiring P&G Beauty Brands. Coty also considered, among other things, the expected impacts of the integration of P&G Beauty Brands with Coty and the other factors identified under “The Transactions—Coty’s Reasons for the Transactions.” P&G also considered, among other things, the relative sales, earnings and cash flow growth rates of P&G Beauty Brands, the value to P&G shareholders that could be realized in the Transactions and the other factors identified under “The Transactions—P&G’s Reasons for the Transactions.”

 



 

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Set forth below are diagrams that graphically illustrate, in simplified form, the existing corporate structure, the corporate structure immediately following the Distribution but prior to the Merger, and the corporate structure immediately following the completion of the Transactions.

 

 

LOGO

 



 

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LOGO

 



 

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LOGO

Business Strategies After the Transactions

Coty’s strategic vision is to be a new global leader and challenger in the beauty industry. After the completion of the Transactions, Coty intends to reorganize its business into three new divisions: Coty Luxury Division, focused on fragrances and skin care; Coty Consumer Beauty Division, focused on color cosmetics, retail hair coloring and styling products and body care; and Coty Professional Beauty Division, focused on servicing salon owners and professionals in both hair and nail care. This new category-focused organizational structure puts consumers first by specifically targeting how and where they shop, and what and why they purchase. In this new organizational structure, each division will have full end-to-end responsibility to optimize consumers’ beauty experience in the relevant categories and channels, which Coty believes will drive profitable growth through targeted expertise.

 



 

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Additional Agreements

In connection with the Transactions, P&G, Coty, Galleria Company and Merger Sub will also enter into other ancillary agreements at the time of the Separation relating to transition services, tax matters, technology licenses, trademark licenses and certain other matters. See “Additional Agreements.”

Number of Shares of Galleria Company Common Stock to be Distributed to P&G Shareholders

As part of the Separation, Galleria Company will issue and deliver to P&G a number of additional shares of Galleria Company common stock such that P&G will hold a total of 409,726,299 shares of Galleria Company common stock at the time of the Distribution, which is the Galleria Stock Amount. This will result in the shares of Galleria Company common stock, when converted into shares of Coty common stock and combined with the existing shares of Coty common stock, being equal to approximately 54% of the fully diluted shares of Coty common stock upon consummation of the Merger.

Terms of the Exchange Offer

P&G is offering holders of shares of P&G common stock the opportunity to exchange their shares of P&G common stock for shares of Galleria Company common stock, which will be automatically converted into shares of Coty common stock in the Merger. You may tender all, some or none of your shares of P&G common stock. This prospectus and the related documents are being sent to persons who directly held shares of P&G common stock on August 26, 2016 and brokers, dealers, commercial banks, trust companies and similar institutions whose names or the names of whose nominees appear on P&G’s shareholder list or, if applicable, who are listed as participants in a clearing agency’s security position listing for subsequent transmittal to beneficial owners of shares of P&G’s common stock.

Shares of P&G common stock validly tendered and not properly withdrawn will be accepted for exchange at the exchange ratio determined as described under “The Exchange Offer—Terms of the Exchange Offer—Final Exchange Ratio,” on the terms and conditions of the exchange offer and subject to the limitations described below, including the proration provisions. As promptly as practicable following the expiration of the exchange offer and determination of the final proration factor, if any, as described below, P&G will return any shares of P&G common stock that have not been accepted for exchange to the tendering shareholders.

 



 

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For the purposes of illustration, the table below indicates the number of shares of Galleria Company common stock (and effectively shares of Coty common stock) that you would receive per share of P&G common stock accepted in the exchange offer, calculated on the basis described under “The Exchange Offer—Terms of the Exchange Offer—Pricing Mechanism” and taking into account the upper limit, assuming a range of averages of the daily VWAPs of shares of P&G common stock and shares of Coty common stock during the Averaging Period. The first line of the table below shows the indicative Average P&G Stock Price, the indicative Average Coty Stock Price and the indicative exchange ratio that would have been in effect following the official close of trading on the NYSE on August 31, 2016, based on the daily VWAPs of shares of P&G common stock and shares of Coty common stock on August 29, 2016, August 30, 2016 and August 31, 2016. The table also shows the effects of an illustrative 10% increase or decrease in either or both the Average P&G Stock Price and Average Coty Stock Price based on changes relative to the values as of August 31, 2016.

 

P&G common stock

  

Coty common stock

   Average
P&G
Stock
Price
     Average
Coty
Stock
Price
     Shares of Galleria
Company common
stock to be received
per share of P&G
common stock
tendered(1)
    Value
Ratio(2)
 

As of August 31, 2016

   As of August 31, 2016    $ 87.6708       $ 27.2853         3.4550        1.075   

Down 10%

   Up 10%    $ 78.9037       $ 30.0139         2.8268        1.075   

Down 10%

   Unchanged    $ 78.9037       $ 27.2853         3.1095        1.075   

Down 10%

   Down 10%    $ 78.9037       $ 24.5568         3.4550        1.075   

Unchanged

   Up 10%    $ 87.6708       $ 30.0139         3.1409        1.075   

Unchanged

   Down 10%    $ 87.6708       $ 24.5568         3.8388        1.075   

Up 10%

   Up 10%    $ 96.4378       $ 30.0139         3.4550        1.075   

Up 10%

   Unchanged    $ 96.4378       $ 27.2853         3.8005        1.075   

Up 10%

   Down 10%    $ 96.4378       $ 24.5568         3.9033 (3)      0.994   

 

(1) Reflects application of the indicative exchange ratio. Subject to receipt of cash in lieu of fractional shares of Coty common stock. See “The Exchange Offer—Fractional Shares.”
(2) The Value Ratio equals (a) the Average Coty Stock Price multiplied by the exchange ratio, divided by (b) the Average P&G Stock Price.
(3) In this scenario, the upper limit is in effect. Absent the upper limit, the exchange ratio would have been 4.2227 shares of Galleria Company common stock per share of P&G common stock tendered. In this scenario, P&G would announce that the upper limit on the number of shares that can be received for each share of P&G common stock tendered is in effect no later than 9:00 a.m., New York City time, on the trading day immediately preceding the Expiration Date.

During the twelve-month period of September 1, 2015 through August 31, 2016, the highest closing price for P&G common stock on the NYSE was $88.30 and the lowest closing price for Coty common stock on the NYSE was $21.79. If the Average P&G Stock Price and Average Coty Stock Price equaled these closing prices, you would receive only the limit of 3.9033 shares of Galleria Company common stock for each share of P&G common stock tendered, and the value of such shares of Galleria Company common stock, based on the Coty common stock price, would have been less than the value of shares of P&G common stock accepted for exchange (approximately $0.963 of shares of Galleria Company common stock for each $1.00 of shares of P&G common stock accepted for exchange).

Extension; Termination

The exchange offer, and your withdrawal rights, will expire at 12:00 midnight, New York City time, on September 29, 2016, unless the exchange offer is extended or earlier terminated. You must tender your shares of P&G common stock prior to this time if you want to participate in the exchange offer. P&G may extend or terminate the exchange offer as described in this prospectus.

 



 

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Conditions for Completion of the Exchange Offer

P&G’s obligation to exchange shares of Galleria Company common stock for shares of P&G common stock is subject to the conditions listed under “The Exchange Offer—Conditions for Completion of the Exchange Offer,” including the satisfaction or waiver of specified conditions precedent to the completion of Transactions as provided in the Transaction Agreement and certain other conditions. These conditions include that the number of shares of Galleria Company common stock that would be distributed in exchange for shares of P&G common stock validly tendered in the exchange offer and not properly withdrawn exceeds the Minimum Condition, currently expected to be approximately 86.1%, provided that, at any time prior to the Expiration Date, P&G in its reasonable judgment and after consultation with Coty may reapply the agreed-upon formula used to calculate the Minimum Condition using updated information reflecting the then-current data or otherwise increase the Minimum Condition by the minimum amount necessary, in each case, to ensure that the agreed-upon minimum amount of P&G common stock is tendered; P&G’s receipt of an opinion from its special tax counsel regarding certain aspects of the Transactions; and certain other conditions. See “The Transaction Agreement—Conditions to the Transactions” for a description of the material conditions precedent to the Transactions.

P&G may waive any or all of the conditions to the exchange offer prior to the expiration of the exchange offer. Neither Galleria Company nor Coty has any right to waive any of the conditions to the exchange offer, other than waivers of conditions to their obligation to complete the Transactions as provided in the Transaction Agreement. P&G does not currently expect to waive any of these conditions.

Proration; Tenders for Exchange by Holders of Fewer than 100 Shares of P&G Common Stock

If, upon the expiration of the exchange offer, P&G shareholders have validly tendered and not properly withdrawn more shares of P&G common stock than P&G is offering to accept for exchange (taking into account the exchange ratio and the total number of shares of Galleria Company common stock owned by P&G), P&G will limit the number of shares of P&G common stock that it accepts for exchange in the exchange offer through a proration process. Proration for each tendering P&G shareholder will be based on (1) the proportion that the total number of shares of P&G common stock to be accepted for exchange bears to the total number of shares of P&G common stock validly tendered and not properly withdrawn and (2) the number of shares of P&G common stock validly tendered and not properly withdrawn by that shareholder (rounded to the nearest whole number of shares of P&G common stock and subject to any adjustment necessary to ensure the exchange of all shares of Galleria Company common stock owned by P&G), except for tenders of odd-lots. Beneficial holders (other than plan participants in a P&G U.S. benefit plan) of fewer than 100 shares of P&G common stock who validly tender all of their shares will not be subject to proration if the exchange offer is oversubscribed. Beneficial holders of more than 100 shares of P&G common stock are not eligible for this preference. See “The Exchange Offer—Terms of the Exchange Offer—Proration; Tenders for Exchange by Holders of Fewer than 100 Shares of P&G Common Stock.”

P&G will announce the preliminary proration factor at www.dfking.com/pg and separately by press release as promptly as practicable after the Expiration Date. At the expiration of the guaranteed delivery period (three NYSE trading days following the Expiration Date), P&G will confirm the final results of the exchange offer, including the final proration factor, with the Exchange Agent. As promptly as practicable after the final results are confirmed, P&G will announce the final results of the exchange offer, including the final proration factor, at www.dfking.com/pg and separately by press release.

Fractional Shares

Fractional shares of Galleria Company common stock will be issued in the Distribution. The shares of Galleria Company common stock (including the fractional shares) will be held by the Exchange Agent for the benefit of P&G shareholders whose shares of P&G common stock are accepted in the exchange offer and, if the

 



 

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exchange offer is completed but not fully subscribed, a subsequent pro rata dividend of the Remaining Shares to the Remaining P&G Shareholders. As promptly as practicable following the completion of the Distribution, Merger Sub will merge with and into Galleria Company, with Galleria Company surviving the Merger and becoming a wholly owned subsidiary of Coty. Upon consummation of the Merger, each share of Galleria Company common stock will automatically convert into the right to receive one share of Coty common stock. No fractional shares of Coty common stock will be issued in the Merger to holders of fractional shares of Galleria Company common stock. In lieu of any fractional shares of Coty common stock, holders of fractional shares of Galleria Company common stock who would otherwise be entitled to receive such fractional shares of Coty common stock will be entitled to an amount in cash, without interest, equal to the holder’s pro rata portion of the net proceeds of the sale of fractional shares in the open market, which will occur no later than 20 business days after the completion of the Transactions, obtained by aggregating the fractional shares of Coty common stock otherwise allocable to the holders of fractional shares of Galleria Company common stock. The distribution of cash in lieu of fractional shares of Coty common stock will occur separate from, and subsequent to, the distribution of shares of Coty common stock.

Procedures for Tendering

The procedures you must follow to participate in the exchange offer will depend on how you hold your shares of P&G common stock. For you to validly tender your shares of P&G common stock pursuant to the exchange offer, before the expiration of the exchange offer, you will need to take the following steps:

 

    If you hold certificates for shares of P&G common stock, you must deliver to the Exchange Agent at the address listed on the back cover of this prospectus a properly completed and duly executed letter of transmittal, together with any required signature guarantees and any other required documents, and the certificates representing the shares of P&G common stock tendered;

 

    If you hold shares of P&G common stock in book-entry form through the DRS or in the DSPP, you must deliver to the Exchange Agent at the address listed on the back cover of this prospectus a properly completed and duly executed letter of transmittal, together with any required signature guarantees and any other required documents. Since certificates are not issued for DRS and DSPP shares, you do not need to deliver any certificates representing those shares to the Exchange Agent;

 

    If you hold shares of P&G common stock through a broker, dealer, commercial bank, trust company or similar institution, you should receive instructions from that institution on how to participate in the exchange offer. In this situation, do not complete the letter of transmittal. Please contact the institution through which you hold your shares directly if you have not yet received instructions. Some financial institutions may effect tenders by book-entry transfer through The Depository Trust Company;

 

    If you hold shares of P&G common stock through a P&G U.S. benefit plan, you do not need to take any immediate action with respect to the exchange offer. A fiduciary appointed under each of those plans will determine whether (i) to permit beneficial owners to elect to tender shares of P&G common stock for exchange or (ii) alternatively, to exchange shares of P&G common stock held in each plan for the benefit of employees and former employees of P&G and their beneficiaries. P&G has been informed by each of the trustees of the P&G U.S. benefit plans that beneficial owners will not be permitted to elect to tender shares held in those plans and that the trustees do not expect to elect to tender shares held for the benefit of employees, former employees and their beneficiaries in the exchange offer. You should contact the appropriate fiduciary for your respective benefit plan if you have questions about your plan’s participation in the exchange offer; and

 

    If you wish to tender your shares of P&G common stock but share certificates are not immediately available, time will not permit shares or other required documentation to reach the Exchange Agent before the expiration of the exchange offer or the procedure for book-entry transfer cannot be completed on a timely basis, you must follow the procedures for guaranteed delivery described under “The Exchange Offer—Terms of the Exchange Offer—Procedures for Tendering—Guaranteed Delivery Procedures.”

 



 

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Delivery of Shares of Galleria Company Common Stock

At or prior to the completion of the exchange offer, P&G will irrevocably deliver to the Exchange Agent all of the shares of Galleria Company common stock outstanding, with irrevocable instructions to hold the shares of Galleria Company common stock for the benefit of P&G shareholders whose shares of P&G common stock are being accepted in the exchange offer and, in the case of a subsequent pro rata dividend, P&G shareholders whose shares of P&G common stock remain outstanding after the completion of the exchange offer. Upon completion of the exchange offer, Coty will deposit with its transfer agent book-entry authorizations representing shares of Coty common stock, with irrevocable instructions to hold the shares of Coty common stock for the benefit of the holders of shares of Galleria Company common stock. Pursuant to the Merger, each share of Galleria Company common stock will automatically convert into the right to receive one share of Coty common stock. As promptly as practicable following the Merger and P&G’s notice and determination of the final proration factor, if any, Coty’s transfer agent will credit the shares of Coty common stock, into which the shares of Galleria Company common stock have been converted, to book-entry accounts maintained for the benefit of the P&G shareholders who received shares of Galleria Company common stock in the exchange offer or as a pro rata dividend, if any, and will send these holders a statement evidencing their holdings of Coty common stock. See “The Exchange Offer—Terms of the Exchange Offer—Exchange of Shares of P&G Common Stock.”

Withdrawal Rights

You may withdraw all, some or none of your tendered shares of P&G common stock at any time before the expiration of the exchange offer. If you change your mind again before the expiration of the exchange offer, you may re-tender your shares of P&G common stock by again following the exchange offer procedures.

In order to withdraw your shares, you (or, in lieu thereof, if you hold your shares through a broker, dealer, commercial bank, trust company or similar institution, that institution on your behalf) must provide a written notice of withdrawal or facsimile transmission of notice of withdrawal to the Exchange Agent. See “The Exchange Offer—Terms of the Exchange Offer—Withdrawal Rights.”

No Appraisal Rights

No appraisal rights are available to holders of shares of P&G common stock in connection with the exchange offer or any pro rata dividend of shares of Galleria Company common stock.

Dividend and Distribution of Any Shares of Galleria Company Common Stock Remaining after Completion of the Exchange Offer

If the exchange offer is completed but is not fully subscribed, P&G will distribute all of the Remaining Shares in a subsequent pro rata dividend to the Remaining P&G Shareholders. Any P&G shareholder who validly tenders (and does not properly withdraw) shares of P&G common stock for shares of Galleria Company common stock in the exchange offer will waive its rights with respect to those tendered shares of P&G common stock to receive, and forfeit any rights to, any Remaining Shares distributed on a pro rata basis to the Remaining P&G Shareholders in the event the exchange offer is not fully subscribed.

At or prior to the completion of the exchange offer, P&G will deliver all of the shares of Galleria Company common stock owned by P&G to the Exchange Agent with irrevocable instructions to hold the shares of Galleria Company common stock for the benefit of P&G shareholders whose shares of P&G common stock have been accepted for exchange in the exchange offer and, in the case of any subsequent pro rata dividend, the Remaining P&G Shareholders. If there is a subsequent pro rata dividend to be distributed, the Exchange Agent will calculate the exact number of Remaining Shares to be distributed as a pro rata dividend to the Remaining P&G Shareholders, and P&G will distribute the Remaining Shares immediately thereafter. See “The Exchange Offer—Dividend and Distribution of Any Shares of Galleria Company Common Stock Remaining after Completion of the Exchange Offer.”

 



 

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Legal and Other Limitations; Certain Matters Relating to Non-U.S. Jurisdictions

This prospectus is not an offer to buy, sell or exchange and it is not a solicitation of an offer to buy or sell any shares of P&G common stock, Galleria Company common stock or Coty common stock in any jurisdiction in which such offer, sale or exchange is not permitted. Countries outside the United States generally have their own legal requirements that govern securities offerings made to persons resident in those countries and often impose stringent requirements about the form and content of offers made to the general public. None of P&G, Galleria Company or Coty has taken any action under those non-U.S. regulations to facilitate a public offer to exchange the shares of P&G common stock, Galleria Company common stock or Coty common stock outside the United States. Accordingly, the ability of any non-U.S. shareholders to tender shares of P&G common stock in the exchange offer will depend on whether there is an exemption available under the laws of such person’s home country that would permit the person to participate in the exchange offer without the need for P&G, Galleria Company or Coty to take any action to facilitate a public offering in that country or otherwise. For example, some countries exempt transactions from the rules governing public offerings if they involve persons who meet certain eligibility requirements relating to their status as sophisticated or professional investors. See “The Exchange Offer—Legal and Other Limitations; Certain Matters Relating to Non-U.S. Jurisdictions” for additional information about limitations on the exchange offer outside the United States.

Approval of the Transactions

Coty’s board of directors has approved the Transaction Agreement, the Merger and the other Transactions. Coty, as the sole shareholder of Merger Sub, has approved the Merger. Holders representing more than a majority of the voting power of Coty have approved, by written consent, the issuance of shares of Coty common stock in connection with the Transactions. Coty will file a definitive information statement on Schedule 14C with the SEC that relates to such written consent. No further approval of Coty stockholders is required or being sought in connection with the Transactions.

No vote of P&G shareholders is required or being sought in connection with the Transactions. Additionally, P&G as the sole shareholder of Galleria Company, and subject to satisfaction of the conditions set out in the Transaction Agreement, will approve the Merger prior to the Distribution.

Opinions of Coty’s Financial Advisors

Coty retained Morgan Stanley & Co. LLC (referred to in this prospectus as “Morgan Stanley”) to act as its financial advisor and to provide a fairness opinion in connection with the Merger. At the meeting of Coty’s board of directors on July 8, 2015, Morgan Stanley rendered its oral opinion, subsequently confirmed in writing, that as of such date, and based upon and subject to the various assumptions, procedures, matters, qualifications and limitations on the scope of the review undertaken by Morgan Stanley as set forth in the written opinion, the exchange ratio pursuant to the Transaction Agreement was fair from a financial point of view to Coty.

The full text of the written opinion of Morgan Stanley, dated as of July 8, 2015, which sets forth, among other things, the assumptions made, procedures followed, matters considered, qualifications and limitations on the scope of the review undertaken by Morgan Stanley in rendering its opinion, is attached to this prospectus as Annex A. Coty stockholders are encouraged to read the opinion carefully and in its entirety. The Morgan Stanley opinion was rendered for the benefit of Coty’s board of directors, in its capacity as such, and addressed only the fairness from a financial point of view to Coty of the exchange ratio pursuant to the Transaction Agreement as of the date of the opinion. Morgan Stanley’s opinion did not address any other aspect of the Merger or related transactions, including the prices at which Coty common stock will trade following consummation of the Merger or at any time, or the fairness of the amount or nature of the compensation to any of P&G or Galleria Company officers, directors or employees, or any class of such persons, relative to the consideration to be paid to the holders of shares of

 



 

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the Galleria Company common stock in the Transactions. The opinion was addressed to, and rendered for the benefit of, Coty’s board of directors and was not intended to, and did not, constitute advice or a recommendation as to whether stockholders of Coty entitled to vote on the Merger should grant their consent in lieu of a meeting to approve actions taken in connection with the Merger. For a more detailed summary of the opinion of Morgan Stanley and the fees paid and payable to Morgan Stanley, see the section of this prospectus entitled “The Transactions—Opinions of Coty’s Financial Advisors.” The summary of the opinion of Morgan Stanley set forth in this prospectus is qualified in its entirety by reference to the full text of the opinion.

In preparing its opinion, Morgan Stanley assumed that all relevant licenses of P&G Beauty Brands, including the Excluded Brands, would transfer with Galleria Company to Coty. However, the assets and liabilities transferred by P&G and assumed by Galleria Company will exclude those relating to the Excluded Brands. At the request of the management of Coty and based on specific projections provided by the management of Coty, the financial advisors performed, for illustrative purposes only, a sensitivity analysis to illustrate the impact of potential deviations from the assumption that all relevant licenses of P&G Beauty Brands, including the Excluded Brands, transfer with Galleria Company to Coty. This analysis did not, nor was it intended to, correspond to an analysis of the Excluded Brands not transferring with Galleria Company. For further information regarding the financial effect of the Excluded Brands not transferring with Galleria Company, see the sections of this prospectus entitled “The Transaction Agreement—Recapitalization,” “—The Parties to the Transactions—Galleria Co.” and “Information on P&G Beauty Brands—Overview.” At the direction of Coty, Morgan Stanley further assumed that, in accordance with the terms of the Transaction Agreement, the Coty stockholders would own 48% of the fully diluted shares of Coty common stock immediately following the acquisition of Galleria Company. However, in connection with subsequent share repurchases by Coty, P&G and Coty agreed that such repurchased shares would be treated as if they remained outstanding for purposes of the Transaction Agreement by modifying the definition of “fully diluted basis” within the Transaction Agreement, although such shares would not be included in a comparable GAAP measure or otherwise reflected in “fully diluted” as that term is otherwise used in this prospectus and defined under “Helpful Information.” As a result, existing Coty stockholders are currently expected to own approximately 46% of the fully diluted shares of Coty common stock as that term is otherwise used in this prospectus and defined under “Helpful Information.”

Coty also retained Barclays Capital Inc. (referred to in this prospectus as “Barclays”) to provide a fairness opinion in connection with the Merger. At the meeting of Coty’s board of directors on July 8, 2015, Barclays rendered its oral opinion, subsequently confirmed in writing, that as of such date, and based upon and subject to the various assumptions, procedures, matters, qualifications and limitations on the scope of the review undertaken by Barclays as set forth in the written opinion, from a financial point of view, the exchange ratio to be paid in the proposed transaction was fair to Coty.

The full text of the written opinion of Barclays, dated as of July 8, 2015, which sets forth, among other things, the assumptions made, procedures followed, matters considered, qualifications and limitations on the scope of the review undertaken by Barclays in rendering its opinion, is attached to this prospectus as Annex B. Coty stockholders are encouraged to read the opinion carefully and in its entirety. The Barclays opinion was rendered for the benefit of Coty’s board of directors, in its capacity as such, and addressed only the fairness, from a financial point of view, to Coty of the exchange ratio to be paid in the proposed transaction as of the date of the opinion. Barclays’ opinion did not address any other aspect of the Merger or related transactions, including the prices at which Coty common stock will trade following consummation of the Merger or at any time, or the fairness of the amount or nature of the compensation to any of P&G or Galleria Company officers, directors or employees, or any class of such persons, relative to the consideration to be paid to the holders of shares of Galleria Company common stock in the Transactions. The opinion was addressed to, and rendered for the benefit of, Coty’s board of directors and was not intended to, and did not, constitute advice or a recommendation as to whether stockholders of Coty entitled to vote on the Merger should grant their consent in lieu of a meeting to approve actions taken

 



 

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in connection with the Merger. For a more detailed summary of the opinion of Barclays and the fees paid and payable to Barclays, see the section of this prospectus entitled “The Transactions—Opinions of Coty’s Financial Advisors.” The summary of the opinion of Barclays set forth in this registration statement is qualified in its entirety by reference to the full text of the opinion.

In preparing its opinion, Barclays assumed that all relevant licenses of P&G Beauty Brands, including the Excluded Brands, would transfer with Galleria Company to Coty. However, the assets and liabilities transferred by P&G and assumed by Galleria Company will exclude those relating to the Excluded Brands. At the request of the management of Coty and based on specific projections provided by the management of Coty, the financial advisors performed, for illustrative purposes only, a sensitivity analysis to illustrate the impact of potential deviations from the assumption that all relevant licenses of P&G Beauty Brands, including the Excluded Brands, transfer with Galleria Company to Coty. This analysis did not, nor was it intended to, correspond to an analysis of the Excluded Brands not transferring with Galleria Company. For further information regarding the financial effect of the Excluded Brands not transferring with Galleria Company, see the sections of this prospectus entitled “The Transaction Agreement—Recapitalization,” “—The Parties to the Transactions—Galleria Co.” and “Information on P&G Beauty Brands—Overview.” At the direction of Coty, Barclays further assumed that, in accordance with the terms of the Transaction Agreement, the Coty stockholders would own 48% of the fully diluted shares of Coty common stock immediately following the acquisition of Galleria Company. However, in connection with subsequent share repurchases by Coty, P&G and Coty agreed that such repurchased shares would be treated as if they remained outstanding for purposes of the Transaction Agreement by modifying the definition of “fully diluted basis” within the Transaction Agreement, although such shares would not be included in a comparable GAAP measure or otherwise reflected in “fully diluted” as that term is otherwise used in this prospectus and defined under “Helpful Information.” As a result, existing Coty stockholders are currently expected to own approximately 46% of the fully diluted shares of Coty common stock as that term is otherwise used in this prospectus and defined under “Helpful Information.”

Regulatory Approvals

The parties have agreed to use reasonable best efforts to obtain, as soon as practicable and prior to the consummation of the Merger, all governmental approvals under the HSR Act and under any other antitrust, competition or merger control laws that may be necessary to complete the Transactions. See “The Transaction Agreement—Covenants—Efforts to Close.”

Under the HSR Act, Coty and P&G were required to give notification and furnish information to the Federal Trade Commission and the Antitrust Division of the Department of Justice and to wait the specified waiting period before consummating the Merger. Coty and P&G each filed the required notification and report forms with the Federal Trade Commission and the Antitrust Division on October 20, 2015. The U.S. antitrust review under the HSR Act expired at the conclusion of a second waiting period on December 23, 2015 after Coty had withdrawn and refiled its Hart-Scott-Rodino filing.

In addition to the foregoing, the Merger is subject to review under the antitrust laws of the European Union, Argentina, Australia, Brazil, Canada, China, Columbia, Israel, Mexico, New Zealand, Russia, South Africa, Tunisia, Turkey, Ukraine, and U.S. state antitrust laws and could be the subject of challenges by state attorneys general under those laws, or by private parties under federal or state antitrust laws. As of August 15, 2016, the Merger has cleared antitrust review in the European Union, Australia, Brazil, Canada, China, Columbia, Israel, Mexico, New Zealand, Russia, South Africa, Tunisia, Turkey, and Ukraine.

 



 

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Risk Factors

In deciding whether to tender your shares of P&G common stock in the exchange offer, you should carefully consider the matters described in the section “Risk Factors,” as well as other information included in this prospectus and the other documents incorporated by reference herein.

Coty Indebtedness

On October 27, 2015, Coty entered into the Coty Credit Agreement with the other borrowers party thereto from time to time, the lenders from time to time party thereto, JPMorgan Chase Bank, N.A., as administrative agent, and the other agents from time to time party thereto. The Coty Credit Agreement provides for the Coty Senior Secured Credit Facilities in the aggregate principal amount of $4.500 billion comprised of (1) a $1.500 billion five-year revolving credit facility, which includes up to $80.0 million in swingline loans available for short-term borrowings, (2) a $1.750 billion five-year term loan A facility and (3) a seven-year term loan B facility comprising of a $500.0 million tranche and a €665.0 million tranche. The revolving credit facility is available to be borrowed by Coty in pounds sterling, Swiss francs, Canadian dollars, euros and other currencies reasonably acceptable to the administrative agent and the revolving lenders. On October 27, 2015, the proceeds of the Coty Senior Secured Credit Facilities were used to refinance prior Coty credit facilities. The revolving credit facility will be used for working capital needs, general corporate purposes and other purposes not prohibited by the Coty Credit Agreement. Immediately following the closing of the Coty Senior Secured Credit Facilities, $220 million was outstanding under the revolving credit facility.

The term loan A facility amortizes in equal quarterly installments of 1.25% of the original principal amount of the term loan A facility, with the balance due on October 27, 2020. The term loan B facility amortizes in equal quarterly installments of 0.25% of the original principal amount of the term loan B facility, with the balance due on October 27, 2022. The revolving credit facility will mature on October 27, 2020. Pursuant to a Guaranty Agreement, dated as of October 27, 2015, all of the foregoing debt will be guaranteed by certain of Coty’s wholly owned domestic subsidiaries, subject to certain carve-outs and exceptions. Borrowings under the Coty Senior Secured Credit Facilities are senior secured obligations of Coty and secured (subject to certain carve-outs and exceptions) by substantially all of the assets of the borrower and each guarantor.

On April 8, 2016, Coty entered into an Incremental Assumption Agreement and Amendment No. 1 (the “Incremental Agreement”) to the Coty Credit Agreement with Coty B.V., a private company with limited liability incorporated under the laws of the Netherlands (the “Dutch Borrower”), certain subsidiaries of Coty party thereto, the incremental lenders party thereto and JPMCB, as administrative agent. The Incremental Agreement provides for an additional €140,000,000 in term A loan commitments and an additional €325,000,000 in term B loan commitments under the Coty Credit Agreement, all of which were borrowed by the Dutch Borrower as of the closing date of the Incremental Agreement. The proceeds were used by the Dutch Borrower to refinance certain intercompany indebtedness of the Dutch Borrower outstanding on the closing date of the Incremental Agreement, which funds were then used to partially repay amounts drawn on the Coty revolving credit facility. The loans made under the additional term A loan commitments have substantially identical terms to the existing term A loans under the Coty Credit Agreement, and the loans under the additional term B loan commitments have substantially identical terms to the term B loans denominated in euros under the Coty Credit Agreement.

See “Debt Financing—Coty Indebtedness.”

Galleria Indebtedness

On January 26, 2016, Galleria Company entered into the Galleria Credit Agreement. The Galleria Credit Agreement provides for the Galleria Senior Secured Credit Facilities comprised of (1) a $2.000 billion five-year term loan A facility, (2) a $1.000 billion seven-year term loan B facility and (3) a $1.500 billion five-year

 



 

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revolving credit facility. The loans will initially be made to Galleria Company. The payment of amounts due under the term loan facilities and the revolving credit facility will initially be guaranteed by all existing and future direct and indirect material domestic subsidiaries of Galleria Company, subject to certain exceptions, and after the consummation of the Merger, to the extent the requirements of the Transaction Agreement are satisfied, will also be guaranteed by Coty and all subsidiaries of Coty that guarantee the indebtedness under the Coty Senior Secured Credit Facilities. After the date of the initial funding (other than in connection with the escrow funding of the term loan B facility on January 26, 2016) under the Galleria Senior Secured Credit Facilities (the “Galleria Financing Closing Date”), the loans will be senior secured obligations of Galleria Company, secured by substantially all of the assets of the borrower and each guarantor.

Following the first anniversary of the consummation of the Merger, the term loan A facility will amortize in equal quarterly installments of 1.25% of the original principal amount of the term loan A facility, with the balance due on the date that is five years following the Galleria Financing Closing Date. Following the first anniversary of the consummation of the Merger, the term loan B facility will amortize in equal quarterly installments of 0.25% of the original principal amount of the term loan B facility, with the balance due on the date that is seven years following the Galleria Financing Closing Date. The revolving credit facility will mature on the date that is five years following the Galleria Financing Closing Date. See “Debt Financing—Galleria Indebtedness.”

Board of Directors and Management of Coty following the Transactions

The directors of Coty immediately following the closing of the Transactions are expected to be the same as the directors of Coty immediately prior to the closing of the Transactions, except that Camillo Pane, Coty’s current Executive Vice President, Category Development, has been appointed to the position of CEO and to Coty’s board of directors, each effective as of the day following the completion of the Transactions.

Certain executive officers of Coty will assume new roles in connection with Coty’s new organizational structure following the closing of the Transactions and the integration of Galleria. See “Information on Coty—Directors and Executive Officers.”

Accounting Treatment and Considerations

Accounting Standards Codification (“ASC”) 805, Business Combinations, requires the use of the acquisition method of accounting for business combinations. In applying the acquisition method, it is necessary to identify both the accounting acquiree and the accounting acquirer. In a business combination effected through an exchange of equity interests, such as the Merger, the entity that issues the interests (Coty in this case) is generally the acquiring entity. In identifying the acquiring entity in a combination effected through an exchange of equity interests, however, all pertinent facts and circumstances must be considered, including the following:

 

    The relative voting interests of Coty after the Transactions. In this case, existing Coty stockholders are expected to retain 46% of the equity ownership and associated voting rights in Coty after the Transactions. P&G shareholders participating in the exchange offer (and subsequent pro rata dividend, if any) are expected to receive approximately 54% of the fully diluted shares of Coty common stock and associated voting rights in Coty after the Transactions.

 

    The existence of a large minority voting interest in Coty after the Transactions. In this case, JAB Cosmetics B.V., the owner of all of the outstanding shares of the Coty class B common stock and 12.2% of the Coty common stock, which together represent approximately 97% of Coty’s outstanding voting power, will remain the largest stockholder of the combined company overall, owning approximately 36% of the fully diluted shares of Coty common stock at the completion of the Transactions.

 

   

The composition of the governing body of Coty after the Transactions. In this case, the composition of Coty’s board of directors following completion of the Transactions will be the members of Coty’s board of directors immediately prior to completion of the Transactions, with the addition of Camillo

 



 

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Pane, Coty’s new CEO. Coty’s board of directors will consist of eight directors, each elected for one-year terms by Coty’s stockholders at the annual meeting of stockholders. Coty’s board members are elected by plurality voting, meaning that the director nominees receiving the greatest number of votes are elected. Although former P&G shareholders will have a slight majority of the voting rights, these voting rights are expected to be widely held, the Transaction Agreement does not contemplate the addition of new board members and there is no stockholders’ agreement or voting agreement in which those new Coty stockholders would vote as a group. Therefore, any significant shift in the composition of Coty’s board of directors is unlikely to occur as a result of the Transactions.

 

    The composition of the senior management of Coty after the Transactions. In this case, Coty’s future management team will have eight of ten executives from Coty’s existing senior management team.

After considering all pertinent facts, reviewing the criteria outlined in ASC 805 and conducting the relevant analysis, Coty has concluded that it is the accounting acquirer in the Transactions. ASC 805 requires consideration of all pertinent facts and circumstances, listing several potential indicators, none of which is weighed more heavily than another. Coty’s conclusion is based primarily upon the following facts: (1) JAB Cosmetics B.V. will remain the largest individual Coty stockholder, owning approximately 36% of the fully diluted shares of Coty common stock at the completion of the Transactions, (2) the only immediate change in the composition of Coty’s board of directors after the Transactions will be the addition of Coty’s new CEO, Camillo Pane, (3) except as noted above, Coty’s senior management prior to the Transactions will continue to be the senior management of the combined business after the Transactions and (4) Coty is issuing its equity interests as consideration for the Transactions. Accordingly, even though P&G shareholders that participate in the exchange offer will in the aggregate obtain a majority of the voting rights, Coty will apply the acquisition method of accounting to the assets and liabilities of Galleria Company upon completion of the Transactions.

Material U.S. Federal Income Tax Consequences of the Distribution, the Merger and Related Transactions

Cadwalader, Wickersham & Taft LLP, special tax counsel to P&G, has delivered an opinion to the effect that, subject to the qualifications and limitations set forth therein, the (i) Galleria Transfer, taken together with the Distribution, should qualify as a tax-free reorganization pursuant to section 368(a)(1)(D) of the Code, (ii) Distribution, as such, should qualify as a distribution to P&G shareholders pursuant to section 355 of the Code, and (iii) Merger should not cause section 355(e) of the Code to apply to the Distribution. See “The Exchange Offer—Material U.S. Federal Income Tax Consequences of the Distribution, the Merger and Related Transactions.” In addition, the completion of the Distribution is conditioned upon P&G’s receipt of an opinion from Cadwalader, Wickersham & Taft LLP, special tax counsel to P&G, to the effect that the (i) Galleria Transfer, taken together with the Distribution, should qualify as a tax-free reorganization pursuant to section 368(a)(1)(D) of the Code, (ii) Distribution, as such, should qualify as a distribution to P&G shareholders pursuant to section 355 of the Code, and (iii) Merger should not cause section 355(e) of the Code to apply to the Distribution. Accordingly, P&G and P&G shareholders generally should recognize no taxable gain or loss with respect to the Distribution. It is a condition to the Distribution that such opinion not be withdrawn. The opinion will be based on, among other things, certain assumptions and representations as to factual matters and certain covenants made by P&G, Galleria Company, Coty and Merger Sub which, if incorrect or inaccurate in any material respect, could jeopardize the conclusions reached by special tax counsel in its opinion. It should be noted that there is a lack of binding administrative and judicial authority addressing the qualification under sections 355 and 368(a)(1)(D) of the Code of transactions substantially similar to the Distribution and the Merger, that the opinion will not be binding on the IRS or a court and that the IRS or a court may not agree with the opinion. As a result, while it is impossible to determine the likelihood that the IRS or a court could disagree with the conclusions of the above-described opinion, the IRS could assert, and a court could determine, that the Distribution and/or the Merger should be treated as taxable transactions. Neither P&G nor Galleria Company is currently aware of any facts or circumstances that would cause the above-referenced assumptions and representations to be untrue or incorrect in any material respect that would preclude any of P&G, Galleria

 



 

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Company, Coty and Merger Sub from complying with all applicable covenants or that would otherwise jeopardize the conclusions reached by special tax counsel in its opinion. You should note that none of P&G, Galleria Company, Coty or Merger Sub intends to seek a ruling from the IRS as to the U.S. federal income tax treatment of the Transactions.

If, notwithstanding the receipt of an opinion of special tax counsel, the Galleria Transfer and the Distribution, taken together, fail to qualify as a reorganization under section 368(a)(1)(D) of the Code, and the Distribution fails to qualify as a distribution to P&G shareholders pursuant to section 355 of the Code, each P&G shareholder who receives shares of Galleria Company common stock in the Distribution would generally be treated as recognizing taxable gain equal to the difference between the fair market value of the shares of Galleria Company common stock received by the shareholder and its tax basis in the shares of P&G common stock exchanged therefor and/or receiving a taxable distribution equal to the fair market value of the shares of Galleria Company common stock received by the shareholder. P&G would generally recognize taxable gain equal to the excess of the fair market value of the assets transferred to Galleria Company plus liabilities assumed by Galleria Company over P&G’s tax basis in such assets.

Even if the Galleria Transfer and the Distribution, taken together, generally qualify as a reorganization under section 368(a)(1)(D) of the Code and the Distribution generally qualifies as a distribution to P&G shareholders pursuant to section 355 of the Code, the Distribution would become taxable to P&G under section 355(e) of the Code if a 50% or greater interest (by vote or value) in P&G stock or Galleria Company stock were treated as acquired (including, in the latter case, through the acquisition of Coty stock in or after the Merger), directly or indirectly, by certain persons as part of a plan or series of related transactions that included the Distribution. Because P&G shareholders should be treated as owning more than 50% (by vote and value) of the shares of Coty common stock immediately following the Merger, the Merger, by itself, should not cause the Distribution to be taxable to P&G under section 355(e) of the Code. However, if the IRS were to determine that other acquisitions of P&G shares before the Distribution, or Coty shares after the Distribution, were part of a plan or series of related transactions that included the Distribution for purposes of section 355(e) of the Code, such determination could result in the recognition of gain by P&G under section 355(e) of the Code. While P&G generally would recognize gain as if it had sold the shares of Galleria Company common stock distributed to P&G shareholders in the Distribution for an amount equal to the fair market value of such stock, P&G has agreed under the Tax Matters Agreement among P&G, Galleria Company, Coty and Merger Sub to make a protective election under section 336(e) of the Code with respect to the Distribution which generally causes a deemed sale of Galleria Company’s assets upon a taxable Distribution. In such case, to the extent that P&G is responsible for the resulting transaction taxes, Coty generally would be required to make periodic payments to P&G equal to the tax savings arising from a “step up” in the tax basis of Galleria Company’s assets as a result of the protective election under section 336(e) of the Code taking effect.

The consummation of the Merger is conditioned on the receipt by P&G of a tax opinion from Cadwalader, Wickersham & Taft LLP, special tax counsel to P&G, and by Coty of a tax opinion from McDermott Will & Emery LLP, special tax counsel to Coty, in each case, to the effect that the Merger will qualify for U.S. federal income tax purposes as a reorganization within the meaning of section 368(a) of the Code. Accordingly, P&G shareholders who exchange their shares of Galleria Company common stock received in the Distribution for shares of Coty common stock generally will, for U.S. federal income tax purposes, recognize no taxable gain or loss in the Merger, except for any taxable gain or loss attributable to the receipt of cash in lieu of fractional shares of Coty common stock. The opinions will rely on certain assumptions, including assumptions regarding the absence of changes in existing facts and law and the consummation of the Merger in the manner contemplated by the Transaction Agreement, and representations and covenants made by P&G, Galleria Company, Coty and Merger Sub, including those contained in representation letters of officers of Coty and P&G. If any of those representations, covenants or assumptions is incorrect or inaccurate in any material respect, the opinions may not be relied upon, and the U.S. federal income tax consequences of the Merger could differ from

 



 

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those discussed herein. In addition, these opinions are not binding on the IRS or a court, and none of P&G, Galleria Company, Coty or Merger Sub intends to request a ruling from the IRS regarding the U.S. federal income tax consequences of the Transactions. Consequently, there can be no certainty that the IRS will not challenge the conclusions reflected in the opinions or that a court would not sustain such a challenge.

For further information concerning the U.S. federal income tax consequences of the Transactions, see “The Exchange Offer—Material U.S. Federal Income Tax Consequences of the Distribution, the Merger and Related Transactions.”

 



 

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SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA

The following summary historical combined financial data of P&G Beauty Brands, summary historical consolidated financial data of P&G, summary historical consolidated financial data of Coty, summary unaudited condensed combined pro forma financial data of Coty, comparative historical and pro forma per share data of Coty and historical per share data of P&G are being provided to help you in your analysis of the financial aspects of the Transactions. For all periods presented, the summary historical combined financial data of P&G Beauty Brands includes all of the assets and liabilities of P&G Beauty Brands, including the Galleria assets and liabilities, the Divested Brands prior to their disposition and the Excluded Brands. The summary unaudited condensed combined pro forma financial data of Coty and comparative historical and pro forma per share data of Coty have been prepared by Coty for illustrative purposes only and are not necessarily indicative of what the operating results or financial position of Coty or Galleria Company would have been had the Transactions been completed at the beginning of the periods or on the dates indicated, nor are they necessarily indicative of the results of operations or financial condition that may be expected for any future period or date. You should read this information in conjunction with the financial information included elsewhere and incorporated by reference in this prospectus. See “Where You Can Find More Information; Incorporation by Reference,” “Information on P&G Beauty Brands,” “Information on P&G,” “Information on Coty” and “Selected Historical and Pro Forma Financial Data.”

Summary Historical Combined Financial Data of P&G Beauty Brands

P&G Beauty Brands’ combined balance sheet data presented below as of June 30, 2016 and 2015 and statements of income and cash flows data for the three fiscal years ended June 30, 2016, 2015 and 2014 has been derived from P&G Beauty Brands’ audited combined financial statements, included elsewhere in this prospectus. The summary historical combined financial data below is not necessarily indicative of the results of operations or financial condition that may be expected for any future period or date. This information is only a summary and should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations of P&G Beauty Brands” and the financial statements of P&G Beauty Brands and the notes thereto included elsewhere in this prospectus.

 



 

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The financial information of P&G Beauty Brands included in this prospectus reflects assumptions and allocations made by P&G. The financial position, results of operations and cash flows of P&G Beauty Brands presented may be different from those that would have resulted had P&G Beauty Brands been operated as a standalone company or been supported as a subsidiary of Coty. The financial information of P&G Beauty Brands also includes results for the Divested Brands for periods prior to the respective dates of divestiture, as well as the Excluded Brands, which will not be transferred to Coty in the Transactions. As a result, the historical financial information of P&G Beauty Brands is not a reliable indicator of future results. See “Risk Factors.”

 

     Fiscal Year Ended June 30,  
     2016      2015     2014  

Statement of Income Data:

     (Dollars in millions)   

Net sales

   $ 4,911       $ 5,518      $ 6,003   

Cost of products sold

     1,662         1,875        2,029   
  

 

 

    

 

 

   

 

 

 

Gross profit

     3,249         3,643        3,974   

Selling, general and administrative expense

     3,013         3,229        3,515   

Intangible asset impairment charges

     48         —          —     
  

 

 

    

 

 

   

 

 

 

Operating income

     188         414        459   

Interest expense/(income), net

     29         (1     (2

Other non-operating income, net

     8         94        —     
  

 

 

    

 

 

   

 

 

 

Earnings before income taxes

     167         509        461   

Income taxes

     101         361        152   
  

 

 

    

 

 

   

 

 

 

Net income

   $ 66       $ 148      $ 309   
  

 

 

    

 

 

   

 

 

 

 

     As of June 30,  
         2016              2015      
     (Dollars in millions)  

Balance Sheet Data:

     

Total assets

   $ 7,550       $ 6,707   

Long-term debt

     995         —     

Total equity

     4,879         5,107   

 

     Fiscal Year Ended June 30,  
     2016      2015      2014  
     (Dollars in millions)  

Statement of Cash Flows Data:

        

Cash provided by (used in):

        

Operating activities

   $ 391       $ 271       $ 462   

Investing activities

     (1,101      47         (98

Financing activities

     747         (316      (431

Depreciation and amortization expense

     123         125         128   

Capital expenditures

     (116      (106      (109

Other Financial Data:

        

EBITDA(1)

   $ 319       $ 633       $ 587   

 

(1)

EBITDA is a financial measure not prepared in accordance with GAAP and is defined as income before interest expense, interest income, provision for income taxes, depreciation and amortization. EBITDA is not adjusted for restructuring costs. EBITDA is not, and should not, be used as a substitute for net income as determined in accordance with GAAP. P&G and Galleria Company believe EBITDA is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in the beauty

 



 

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  industry. However, EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of P&G Beauty Brands’ results as reported under GAAP. Other companies may calculate EBITDA differently from how EBITDA is calculated for P&G Beauty Brands, limiting its utility as a comparative measure. A reconciliation of EBITDA to net income appears below.

 

     Fiscal Year Ended June 30,  
     2016      2015      2014  
     (Dollars in millions)  

Net income

   $ 66       $ 148       $ 309   

Interest expense/(income), net

     29         (1      (2

Income taxes

     101         361         152   

Depreciation and amortization expense

     123         125         128   
  

 

 

    

 

 

    

 

 

 

EBITDA

   $ 319       $ 633       $ 587   

P&G Beauty Brands earnings before income taxes for the year ended June 30, 2016 include the following items: a $83 million termination fee and a $48 million impairment charge associated with the Dolce & Gabbana fine fragrance license, transition costs of $54 million incurred to prepare for the Transactions, restructuring charges of $50 million and financing costs relating to the Transactions of $30 million (of which $17 million related to interest and $13 million related to lender commitment fees), partially offset by an $8 million gain on sale of the Giorgio Beverly Hills brand. P&G Beauty Brands financial statements also include overhead allocations.

 



 

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Summary Historical Consolidated Financial Data of P&G

The summary historical consolidated financial data presented below has been derived from, and should be read together with, P&G’s consolidated financial statements and the accompanying notes and the related “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections included in P&G’s Annual Report on Form 10-K for the fiscal year ended June 30, 2016, which is incorporated by reference into this prospectus. The summary historical consolidated balance sheet data as of June 30, 2016 and 2015 and consolidated statement of earnings data for the fiscal years ended June 30, 2016, 2015 and 2014 has been derived from P&G’s audited consolidated financial statements incorporated by reference into this prospectus. The data shown below is not necessarily indicative of the results of operations or financial condition that may be expected for any future period or date. To find out where you can obtain copies of P&G’s documents that have been incorporated by reference, see “Where You Can Find More Information; Incorporation by Reference.”

 

    Fiscal Year Ended June 30,  
    2016     2015     2014  
    (Dollars in millions, except
per share data)
 

Consolidated Statement of Earnings Data:

     

Net sales

  $ 65,299      $ 70,749      $ 74,401   

Cost of products sold

    32,909        37,056        39,030   

Selling, general and administrative expense

    18,949        20,616        21,461   

Venezuela deconsolidation charge

    —          2,028        —     
 

 

 

   

 

 

   

 

 

 

Operating income

    13,441        11,049        13,910   

Interest expense

    579        626        709   

Interest income

    182        149        99   

Other non-operating income, net

    325        440        209   
 

 

 

   

 

 

   

 

 

 

Earnings from continuing operations before income taxes

    13,369        11,012        13,509   

Income taxes on continuing operations

    3,342        2,725        2,851   
 

 

 

   

 

 

   

 

 

 

Net earnings from continuing operations

    10,027        8,287        10,658   

Net earnings (loss) from discontinued operations

    577        (1,143     1,127   
 

 

 

   

 

 

   

 

 

 

Net earnings

  $ 10,604      $ 7,144      $ 11,785   
 

 

 

   

 

 

   

 

 

 

Less: Net earnings attributable to noncontrolling interests

    96        108        142   
 

 

 

   

 

 

   

 

 

 

Net earnings attributable to P&G

  $ 10,508      $ 7,036      $ 11,643   
 

 

 

   

 

 

   

 

 

 

Net earnings margin from continuing operations

    15.4     11.7     14.3

Ratio of earnings to fixed charges(1)

    18.2     13.8     15.0

Basic net earnings per share of P&G common stock:(2)

     

Earnings from continuing operations

  $ 3.59      $ 2.92      $ 3.78   

Earnings/(loss) from discontinued operations

    0.21        (0.42     0.41   
 

 

 

   

 

 

   

 

 

 

Basic net earnings per share of P&G common stock

  $ 3.80      $ 2.50      $ 4.19   

Diluted net earnings per share of P&G common stock(2)

     

Earnings from continuing operations

  $ 3.49      $ 2.84      $ 3.63   

Earnings/(loss) from discontinued operations

    0.20        (0.40     0.38   
 

 

 

   

 

 

   

 

 

 

Diluted net earnings per share of P&G common stock

  $ 3.69      $ 2.44      $ 4.01   

 

(1) For purposes of computing the ratios of earnings to fixed charges, (1) earnings consist of earnings from operations before income taxes after eliminating undistributed earnings of equity method investees plus fixed charges (including capitalized interest) and distributed income of equity investees; and (2) fixed charges consist of interest expense (including capitalized interest) and 1/3 of rental expense.
(2) Basic net earnings per common share and diluted net earnings per common share are calculated on net earnings attributable to P&G.

 



 

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     As of June 30,  
     2016      2015  
     (Dollars in millions)  

Consolidated Balance Sheet Data:

     

Total assets

   $ 127,136       $ 129,495   

Long-term debt

     18,945         18,327   

Total stockholders’ equity

     57,983         63,050   

Summary Historical Consolidated Financial Data of Coty

The summary historical consolidated financial data presented below has been derived from, and should be read together with, Coty’s consolidated financial statements and the accompanying notes and the related “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections included in Coty’s Annual Report on Form 10-K for the fiscal year ended June 30, 2016, which is incorporated by reference into this prospectus. The summary historical consolidated financial data as of June 30, 2016 and 2015 and for the fiscal years ended June 30, 2016, 2015 and 2014 has been derived from Coty’s audited consolidated financial statements incorporated by reference in this prospectus. The data shown below is not necessarily indicative of the results of operations or financial condition that may be expected for any future period or date. To find out where you can obtain copies of Coty’s documents that have been incorporated by reference, see “Where You Can Find More Information; Incorporation by Reference.”

 

    Fiscal Year Ended June 30,  
    2016     2015     2014  
   

(Dollars in millions, except per
share data)

 

Consolidated Statement of Operations:

     

Net revenues

  $ 4,349.1      $ 4,395.2      $ 4,551.6   

Gross profit

    2,603.1        2,638.2        2,685.9   

Acquisition-related costs

    174.0        34.1        0.7   

Asset impairment charges

    5.5        —          316.9   

Operating income

    254.2        395.1        25.7   

Interest expense, net

    81.9        73.0        68.5   

Loss on early extinguishment of debt

    3.1        88.8        —     

Other expense (income), net

    30.4        —          1.3   

Income (loss) before income taxes

    138.8        233.3        (44.1

(Benefit) provision for income taxes

    (40.4     (26.1     20.1   

Net income (loss)

    179.2        259.4        (64.2

Net income attributable to noncontrolling interests

    7.6        15.1        17.8   

Net income attributable to redeemable noncontrolling interests

    14.7        11.8        15.4   

Net income (loss) attributable to Coty Inc.

    156.9        232.5        (97.4

Per Share Data:

     

Weighted-average common shares:

     

Basic

    345.5        353.3        381.7   

Diluted

    354.2        362.9        381.7   

Cash dividends declared per common share

  $ 0.25      $ 0.20      $ 0.20   

Net income (loss) attributable to Coty Inc. per common share:

     

Basic

  $ 0.45      $ 0.66      $ (0.26

Diluted

    0.44        0.64        (0.26

 



 

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     As of June 30,  
     2016      2015  
     (Dollars in millions)  

Consolidated Balance Sheet Data:

     

Total assets

   $ 7,100.2       $ 6,018.9   

Long-term debt

     4,170.1         2,634.7   

Total equity

     367.1         984.7   

Summary Non-GAAP Financial Data of Coty

The non-GAAP financial data for the fiscal years ended June 30, 2016, 2015 and 2014 has been derived from Coty’s Annual Report on Form 10-K for the fiscal year ended June 30, 2016. The following data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in Coty’s Annual Report on Form 10-K for the fiscal year ended June 30, 2016 filed with the SEC, which is incorporated by reference herein.

To supplement the financial measures prepared in accordance with GAAP, Coty uses non-GAAP financial measures including Adjusted operating income, Adjusted net income attributable to Coty Inc. and Adjusted net income attributable to Coty Inc. per common share (the “Adjusted Performance Measures”). The reconciliations of these non-GAAP measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are shown in the tables below. These non-GAAP financial measures should not be considered in isolation from, or as a substitute for or superior to, financial measures reported in accordance with GAAP. Moreover, these non-GAAP financial measures have limitations in that they do not reflect all the items associated with the operations of the business as determined in accordance with GAAP. Other companies, including companies in the beauty industry, may calculate similarly titled non-GAAP financial measures differently than Coty does, limiting the usefulness of those measures for comparative purposes.

Despite the limitations of these non-GAAP financial measures, Coty’s management uses the Adjusted Performance Measures as key metrics in the evaluation of Coty’s performance and annual budgets and to benchmark performance of its business against it competitors. The following are examples of how these Adjusted Performance Measures are utilized by Coty’s management:

 

    strategic plans and annual budgets are prepared using the Adjusted Performance Measures;

 

    senior management receives a monthly analysis comparing budget to actual Coty operating results that is prepared using the Adjusted Performance Measures; and

 

    senior management’s annual compensation is calculated, in part, by using the Adjusted Performance Measures.

In addition, Coty’s financial covenant compliance calculations under Coty’s debt agreements are substantially derived from these Adjusted Performance Measures.

Coty’s management believes that Adjusted Performance Measures are useful to investors in their assessment of Coty’s operating performance and the valuation of the company. In addition, these non-GAAP financial measures address questions Coty routinely receives from analysts and investors and, in order to ensure that all investors have access to the same data, Coty’s management has determined that it is appropriate to make this data available to all investors. The Adjusted Performance Measures exclude the impact of certain items (as further described below) and provide supplemental information regarding Coty’s operating performance. By disclosing these non-GAAP financial measures, Coty’s management intends to provide investors with a supplemental comparison of Coty’s operating results and trends for the periods presented. Coty’s management believes these

 



 

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measures are also useful to investors as such measures allow investors to evaluate Coty’s performance using the same metrics that Coty’s management uses to evaluate past performance and prospects for future performance. Coty provides disclosure of the effects of these non-GAAP financial measures by presenting the corresponding treatment prepared in conformity with GAAP in its financial statements, and by providing a reconciliation to the corresponding GAAP measure so that investors may understand the adjustments made in arriving at the non-GAAP financial measures and use the information to perform their own analyses.

Adjusted operating income excludes restructuring costs and business structure realignment programs, amortization, acquisition-related costs and acquisition accounting impacts, the impact of accounting modifications from liability plan accounting to equity plan accounting as a result of amended and restated share-based compensation plans, asset impairment charges and other adjustments as described below. Coty does not consider these items to be reflective of its core operating performance due to the variability of such items from period-to-period in terms of size, nature and significance. They are primarily incurred to realign Coty’s operating structure and integrate new acquisitions, and fluctuate based on specific facts and circumstances. Additionally, Adjusted net income attributable to Coty Inc. and Adjusted net income attributable to Coty Inc. per common share are adjusted for certain interest and other (income) expense as described below and the related tax effects of each of the items used to derive Adjusted net income as such charges are not used by Coty’s management in assessing Coty’s operating performance period-to-period.

The Adjusted Performance Measures changed in the fourth quarter of fiscal 2016 to incorporate the exclusion of expense and tax effects associated with the amortization of acquisition-related intangible assets. Coty’s management believes that such amortization is not reflective of the results of operations in a particular year because the intangible assets result from the allocation of the acquisition purchase price to the fair value of identifiable intangible assets acquired. The effect of this exclusion on Coty’s non-GAAP presentation was to amend Adjusted operating income in a manner that provides investors with a measure of Coty’s operating performance that facilitates period to period comparisons, as well as comparability to Coty’s peers. Exclusion of the amortization expense allows investors to compare operating results that are consistent over time for the consolidated company, including newly acquired and long-held businesses, to both acquisitive and nonacquisitive peer companies.

Adjusted Performance Measures reflect adjustments based on the following items:

 

    Restructuring and other business realignment costs: Coty has excluded costs associated with restructuring and business structure realignment programs to allow for comparable financial results to historical operations and forward-looking guidance. In addition, the nature and amount of such charges vary significantly based on the size and timing of the programs. By excluding the above referenced expenses from its non-GAAP financial measures, Coty’s management is able to evaluate Coty’s ability to utilize its existing assets and estimate their long-term value. Furthermore, Coty’s management believes that the adjustment of these items supplement the GAAP information with a measure that can be used to assess the sustainability of Coty’s operating performance.

 

    Amortization expense: Coty has excluded the impact of amortization of finite-lived intangible assets, as such non-cash amounts are inconsistent in amount and frequency and are significantly impacted by the timing and/or size of acquisitions. Coty’s management believes that the adjustment of these items supplement the GAAP information with a measure that can be used to assess the sustainability of its operating performance. Although Coty excludes amortization of intangible assets from its non-GAAP expenses, Coty’s management believes that it is important for investors to understand that such intangible assets contribute to revenue generation. Amortization of intangible assets that relate to past acquisitions will recur in future periods until such intangible assets have been fully amortized. Any future acquisitions may result in the amortization of additional intangible assets.

 



 

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    Cost related to acquisition activities: Coty has excluded acquisition-related costs and acquisition accounting impacts such as those related to transaction costs and costs associated with the revaluation of acquired inventory in connection with business combinations because these costs are unique to each transaction. The nature and amount of such costs vary significantly based on the size and timing of the acquisitions and the maturities of the businesses being acquired. Also, the size, complexity and/or volume of past acquisitions, which often drives the magnitude of such expenses, may not be indicative of the size, complexity and/or volume of any future acquisitions.

 

    Share-based compensation adjustment: Coty has excluded the impact of the fiscal 2013 accounting modification from liability plan to equity plan accounting for the share-based compensation plans as well as other share-based compensation transactions that are not reflective of the ongoing and planned pattern of recognition for such expense. Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates” contained in the respective forms filed with the SEC for a full discussion of the share-based compensation adjustment.

 

    Asset impairment charges: Coty has excluded the impact of asset impairments as such non-cash amounts are inconsistent in amount and frequency and are significantly impacted by the timing and/or size of acquisitions. Coty’s management believes that the adjustment of these items supplement the GAAP information with a measure that can be used to assess the sustainability of its operating performance.

 

    Other adjustments: Coty has excluded costs associated with the China Optimization program, Public entity preparedness program, Real estate consolidation program, and gains on sales of assets which are not part of its ongoing business. Coty does not expect these items to occur, either as a result of their nature or size, as part of its normal business on a regular basis. Coty’s management believes that the exclusion of such amounts allows its management and readers of its financial statements to further understand Coty’s financial results.

 

    Interest and other (income) expense: Coty has excluded foreign currency impacts associated with acquisition-related and debt financing related forward contracts as the nature and amount of such charges are not consistent and are significantly impacted by the timing and size of such transactions.

 

    Loss on early extinguishment of debt: Coty has excluded loss on extinguishment of debt as this represents a non-cash charge, and the amount and frequency of such charges is not consistent and is significantly impacted by the timing and size of debt financing transactions.

 

    Tax: This adjustment represents the impact of the tax effect of the pretax items excluded from Adjusted net income. The tax impact of the non-GAAP adjustments are based on the tax rates related to the jurisdiction in which the adjusted items are received or incurred.

While acquiring brands and licenses comprises a part of Coty’s overall growth strategy, along with targeting organic growth opportunities, Coty has excluded acquisition-related costs and acquisition accounting impacts in connection with business combinations because these costs are unique to each transaction and the amount and frequency are not consistent and are significantly impacted by the timing and size of its acquisitions. Coty’s management assesses the success of an acquisition as a component of performance using a variety of indicators depending on the size and nature of the acquisition, including:

 

    the scale of the combined company by evaluating consolidated and segment financial metrics;

 

    the expansion of product offerings by evaluating segment, brand, and geographic performance and the respective strength of the brands;

 

    the evaluation of market share expansion in categories and geographies;

 

    the earnings per share accretion and substantial incremental free cash flow generation providing financial flexibility for Coty; and

 



 

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    the comparison of actual and projected results, including achievement of projected synergies, post integration; provided that timing for any such comparison will depend on the size and complexity of the acquisition.

 

     Twelve Months Ended June 30,  

(in millions)

       2016             2015             2014      

Reported operating income

     254.2        395.1        25.7   

% of Net revenues

     5.8     9.0     0.6

Restructuring and other business realignment costs

     109.7        91.4        34.1   

Amortization expense

     79.5        74.7        85.7   

Costs related to acquisition activities

     197.5        44.2        26.9   

Share-based compensation expense adjustment

     1.3        18.3        27.6   

Public entity preparedness costs

     —          —          1.2   

Gain on sale of assets

     (24.8     —          —     

Asset impairment charges

     5.5        —          316.9   

Real estate consolidation program costs

     —          (0.7     32.3   

China Optimization

     —          (19.4     35.9   
  

 

 

   

 

 

   

 

 

 

Total adjustments to reported operating income

     368.7        208.5        560.6   
  

 

 

   

 

 

   

 

 

 

Adjusted operating income

     622.9        603.6        586.3   
  

 

 

   

 

 

   

 

 

 

% of Net revenues

     14.3     13.7     12.9
     Twelve Months Ended June 30,  

(in millions)

   2016     2015     2014  

Reported net income attributable to Coty Inc.

     156.9        232.5        (97.4

% of Net revenues

     3.6     5.3     (2.1 %) 

Adjustments to reported operating income

     368.7        208.5        560.6   

Loss on early extinguishment of debt

     3.1        88.8        —     

Adjustments to noncontrolling interest expense

     —          (1.2     —     

Adjustments to other expense

     30.4        —          —     

Adjustments to interest expense

     (23.9     —          —     

Change in tax provision due to adjustments to reported net income (loss) attributable to Coty Inc.

     (50.0     (120.1     (87.5
  

 

 

   

 

 

   

 

 

 

Adjusted net income attributable to Coty Inc.

     485.2        408.5        375.7   
  

 

 

   

 

 

   

 

 

 

% of Net revenues

     11.2     9.3     8.2

Per Share Data:

      

Adjusted weighted-average common shares

      

Basic

     345.5        353.3        381.7   

Diluted

     354.2        362.9        390.7   

Adjusted net income attributable to Coty Inc. per common share:

      

Basic

   $ 1.40      $ 1.16      $ 0.98   

Diluted

   $ 1.37      $ 1.13      $ 0.96   

 



 

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Summary Unaudited Condensed Combined Pro Forma Financial Data

The summary unaudited condensed combined pro forma financial data presented below is being provided for illustrative purposes only and are not necessarily indicative of what the operating results or financial position of Coty or P&G Beauty Brands would have been had the Transactions been completed at the beginning of the periods or on the dates indicated, nor are they necessarily indicative of the results of operations or financial condition that may be expected for any future period or date. Coty and P&G Beauty Brands may have performed differently had they actually been combined during the periods presented. See “Risk Factors.”

 

     For the fiscal year ended
June 30, 2016 for pro
forma condensed
combined Coty and
P&G Beauty Brands
 
     (Dollars in millions,
except per share data)
 

Statement of Income Data:

  

Net revenues

   $ 8,754.1   

Gross profit

     5,540.7   

Net income

     214.9   

Other Data:

  

Net income attributable to Coty Inc. per common share

  

Basic

   $ 0.28   

Diluted

     0.28   

Weighted-average common shares outstanding

  

Basic

     755.2   

Diluted

     763.9   

Financial Position (as of June 30, 2016):

  

Total assets

     22,818.3   

Long-term debt, net

     5,824.8   

Total stockholders’ equity

     11,685.9   

Comparative Historical and Pro Forma Per Share Data

The following tables set forth historical and pro forma per share data for Coty and historical per share data for P&G. The Coty historical data has been derived from, and should be read together with, the audited consolidated financial statements of Coty and the related notes thereto contained in Coty’s Annual Report on Form 10-K for the fiscal year ended June 30, 2016 incorporated by reference into this prospectus. The Coty pro forma data has been prepared by Coty and derived from the unaudited condensed combined pro forma financial statements of Coty, which gives effect to the completion of Merger and preliminary related acquisition accounting and the application of the net proceeds therefrom. The P&G historical data has been derived from, and should be read together with, the audited consolidated financial statements of P&G and the related notes thereto contained in P&G’s Annual Report on Form 10-K for the fiscal year ended June 30, 2016, which is incorporated by reference into this prospectus. See “Where You Can Find More Information; Incorporation by Reference.”

This summary of comparative historical and pro forma per share data is being provided for illustrative purposes only and is not necessarily indicative of the results that would have been achieved had the Transactions been completed during the period presented, nor are they necessarily indicative of the results of operations or financial condition that may be expected for any future period or date. Coty and P&G Beauty Brands may have performed differently had the Transactions occurred prior to the period

 



 

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presented. You should not rely on the pro forma per share data presented as being indicative of the results that would have been achieved had Coty and the assets and liabilities of P&G Beauty Brands to be acquired by Coty been combined during the period presented or of the future results of Coty following the Transactions.

The following table presents certain historical and pro forma per share data for Coty:

 

     As of and for the
Fiscal Year Ended
June 30, 2016
 
     Historical      Pro
Forma
 

Coty:

     

Weighted-average common shares:

     

Basic

     345.5         755.2   

Diluted

     354.2         763.9   

Book value per common share

   $ 1.04       $ 15.25   

Cash dividends declared per common share

   $ 0.25       $ 0.25   

Net income attributable to Coty Inc. per common share:

     

Basic

   $ 0.45       $ 0.28   

Diluted

     0.44         0.28   

The following table presents certain historical per share data for P&G:

 

     As of and for the
Fiscal Year Ended

June 30, 2016
 

P&G:

  

Net earnings:

  

Basic:

  

Earnings from continuing operations

   $ 3.59   

Earnings/(loss) from discontinued operations

     0.21   
  

 

 

 

Basic net earnings per share

   $ 3.80   

Diluted:

  

Earnings from continuing operations

   $ 3.49   

Earnings/(loss) from discontinued operations

     0.20   
  

 

 

 

Diluted net earnings per share

   $ 3.69   

Weighted average common stock outstanding (in millions):

  

Basic

     2,698.9   

Diluted

     2,844.4   

Book value per share of common stock

   $ 21.73   

Cash dividends declared per share of common stock

   $ 2.66   

 



 

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Historical Market Price and Dividend Data

Historical Market Price

Historical market price data for Galleria Company does not exist as Galleria Company currently is a wholly owned subsidiary of P&G. As such, shares of Galleria Company common stock are not currently listed on a public stock exchange and are not publicly traded. Therefore, no market data is available for Galleria Company.

Shares of P&G common stock are currently traded on the NYSE under the symbol “PG.” On July 8, 2015, the last trading day before the announcement of the Transactions, the last sale price of shares of P&G common stock reported by the NYSE was $80.99. On August 31, 2016, the last sale price of shares of P&G common stock reported by the NYSE was $87.31. The following table sets forth the high and low sale prices of shares of P&G common stock and the dividends declared for the periods indicated. For current price information, P&G shareholders are urged to consult publicly available sources.

 

     P&G Common Stock  
     High      Low      Dividends  

Fiscal Year Ended June 30, 2015

        

First Quarter

   $ 85.40       $ 77.29       $ 0.6436   

Second Quarter

     93.89         81.57         0.6436   

Third Quarter

     91.79         80.81         0.6436   

Fourth Quarter

     84.20         77.10         0.6629   

Fiscal Year Ended June 30, 2016

        

First Quarter

   $ 82.55       $ 65.02       $ 0.6629   

Second Quarter

     81.23         71.29         0.6629   

Third Quarter

     83.87         74.46         0.6629   

Fourth Quarter

     84.80         79.10         0.6695   

Fiscal Year Ending June 30, 2017

        

First Quarter (through August 31, 2016)

   $ 88.50       $ 84.32       $ 0.6695   

Shares of Coty common stock are currently traded on the NYSE under the symbol “COTY.” No public trading market exists for shares of Coty class B common stock. On July 8, 2015, the last trading day before the announcement of the Transactions, the last sale price of shares of Coty common stock reported by the NYSE was $31.52. On August 31, 2016, the last sale price of shares of Coty common stock reported by the NYSE was $26.95. The following table sets forth the high and low sale prices of shares of Coty common stock and the dividends declared for the periods indicated for both Coty common stock and Coty class B common stock. For current price information, Coty stockholders are urged to consult publicly available sources.

 

     Coty Class A Common Stock      Dividends  
             High                      Low              Class A      Class B  

Fiscal Year Ended June 30, 2015

           

First Quarter

   $ 18.47       $ 16.39       $ 0.20       $ 0.20   

Second Quarter

     21.00         15.74         —           —     

Third Quarter

     24.71         18.33         —           —     

Fourth Quarter

     32.62         23.26         —           —     

Fiscal Year Ended June 30, 2016

           

First Quarter

   $ 32.72       $ 24.90       $ 0.25       $ 0.25   

Second Quarter

     30.76         25.17         —           —     

Third Quarter

     29.59         21.48         —           —     

Fourth Quarter

     31.60         24.74         —           —     

Fiscal Year Ending June 30, 2017

           

First Quarter (through August 31, 2016)

   $ 30.13       $ 25.73       $ 0.275       $ 0.275   

 



 

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Dividend Policies

P&G has been paying a dividend for 126 consecutive years since its incorporation in 1890 and has increased its dividend for 60 consecutive years at an annual compound average rate of over 9%. Over the past five years, the dividend has increased at an annual compound average rate of 5%. Nevertheless, as in the past, further dividends will be considered after reviewing dividend yields, profitability expectations and financing needs and will be declared at the discretion of P&G’s board of directors.

Coty has no legal or contractual obligation to pay dividends. Coty has been paying an annual dividend, once per year, since Coty’s initial public offering in 2013. The payment of cash dividends in the future will continue to be at the discretion of Coty’s board of directors. The declaration of any cash dividends, and the amount thereof, will depend on many factors, including Coty’s financial condition, capital requirements, funds from operations, the dividend taxation level, Coty’s stock price, future business prospects and any other factors as Coty’s board of directors may deem relevant. Additionally, the Coty Senior Secured Credit Facilities contain certain customary restrictions on Coty’s ability to pay dividends. The Galleria Senior Secured Credit Facilities entered into in connection with the Transactions contains similar restrictions, and other indebtedness Coty may incur in the future may contain similar restrictions.

 



 

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RISK FACTORS

You should carefully consider each of the following risks and all other information contained or incorporated by reference in this prospectus. Some of the risks described below relate principally to the separation of Galleria from P&G, while others relate principally to the business and the industry in which Coty, including Galleria, will operate.

You should also refer to the risk factors included in Coty’s Annual Report on Form 10-K for the fiscal year ended June 30, 2016 for a discussion of the risks that could adversely affect Coty’s business. These risks are relevant to Coty on a standalone basis and are expected to be risks to the combined company following the completion of the Transactions. The risks described below and incorporated by reference herein may not be the only risks that Coty currently faces or will face after the completion of the Transactions. Additional risks and uncertainties not currently known or currently expected to be immaterial may also materially and adversely affect Coty’s business and financial condition or the price of Coty common stock following the completion of the Transactions.

Risks Relating to the Transactions

If the Distribution does not qualify as a tax-free transaction under sections 355 or 368(a)(1)(D) of the Code or the Merger does not qualify as a tax-free “reorganization” under section 368(a) of the Code, including as a result of actions taken in connection with the Distribution or the Merger or as a result of subsequent acquisitions of P&G, Coty or Galleria Company common stock, then P&G and its shareholders may incur substantial U.S. federal income tax liability, and Coty may have substantial indemnification obligations to P&G under the Tax Matters Agreement.

The completion of the Distribution is conditioned upon P&G’s receipt of a written opinion from Cadwalader, Wickersham & Taft LLP, special tax counsel to P&G, to the effect that the (i) Galleria Transfer, taken together with the Distribution, should qualify as a tax-free reorganization pursuant to section 368(a)(1)(D) of the Code, (ii) Distribution, as such, should qualify as a distribution to P&G shareholders pursuant to section 355 of the Code, and (iii) Merger should not cause section 355(e) of the Code to apply to the Distribution. In addition, the consummation of the Merger is conditioned on the receipt by P&G of a tax opinion from Cadwalader, Wickersham & Taft LLP, special tax counsel to P&G, and by Coty of a tax opinion from McDermott Will & Emery LLP, special tax counsel to Coty, in each case, to the effect that the Merger will qualify for U.S. federal income tax purposes as a reorganization within the meaning of section 368(a) of the Code. The opinions will be based on, among other things, certain assumptions and representations as to factual matters and certain covenants made by P&G, Galleria Company, Coty and Merger Sub which, if incorrect or inaccurate in any material respect, could jeopardize the conclusions reached by special tax counsel in their opinions. None of P&G, Galleria Company, Coty or Merger Sub is aware of any facts or circumstances that would cause the assumptions or representations to be relied upon in the above-described tax opinions to be untrue or incomplete in any material respect or that would preclude any of P&G, Galleria Company, Coty or Merger Sub from complying with all applicable covenants. None of P&G, Galleria Company, Coty or Merger Sub intends to waive these conditions. Any change in currently applicable law, which may be retroactive, or the failure of any representation or assumption to be true, correct and complete or any applicable covenant to be satisfied in all material respects, could adversely affect the conclusions reached by counsel. Furthermore, it should be noted that there is a lack of binding administrative and judicial authority addressing the qualification under sections 355 and 368(a)(1)(D) of the Code of transactions substantially similar to the Distribution and the Merger, the opinions will not be binding on the IRS or a court, and the IRS or a court may not agree with the opinions. As a result, while it is impossible to determine the likelihood that the IRS or a court could disagree with the conclusions of the above-described opinions, the IRS could assert, and a court could determine, that the Distribution and Merger should be treated as taxable transactions.

If, notwithstanding the receipt of the above-described opinions, the Distribution is determined to be a taxable transaction, each P&G shareholder who receives shares of Galleria Company common stock in the

 

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Distribution would generally be treated as recognizing taxable gain equal to the difference between the fair market value of the shares of Galleria Company common stock received by the shareholder and its tax basis in the shares of P&G common stock exchanged therefor and/or, if the exchange offer is completed but is undersubscribed and P&G distributes shares of Galleria Company common stock as a pro rata dividend, receiving a taxable distribution equal to the fair market value of the shares of Galleria Company common stock received by the shareholder in such pro rata distribution. Additionally, in such case, P&G would generally recognize taxable gain equal to the excess of the fair market value of the assets transferred to Galleria Company plus liabilities assumed by Galleria Company over P&G’s tax basis in those assets, and this would likely produce substantial income tax adjustments to P&G.

Even if the Galleria Transfer and the Distribution, taken together, were otherwise to qualify as a tax-free transaction under section 368(a)(1)(D) of the Code, and the Distribution were otherwise to qualify as a distribution to P&G shareholders pursuant to section 355 of the Code, the Distribution would become taxable to P&G (but not P&G shareholders) pursuant to section 355(e) of the Code if a 50% or greater interest (by vote or value) of either P&G or Galleria Company was acquired (including, in the latter case, through the acquisition of Coty stock in or after the Merger), directly or indirectly, by certain persons as part of a plan or series of related transactions that included the Distribution. For this purpose, any acquisitions of shares of P&G common stock, Galleria Company common stock or Coty common stock within the period beginning two years before the Distribution and ending two years after the Distribution are presumed to be part of such a plan, although P&G, Galleria Company or Coty may be able to rebut that presumption. While the Merger will be treated as part of such a plan for purposes of the test, standing alone, it should not cause the Distribution to be taxable to P&G under section 355(e) of the Code because P&G shareholders are expected to hold at least 54%, and in all events will hold more than 52%, of outstanding Coty common stock immediately following the Merger. However, if the IRS were to determine that other acquisitions of shares of P&G common stock, Galleria Company common stock or Coty stock, either before or after the Distribution, were part of a plan or series of related transactions that included the Distribution, that determination could result in the recognition of a taxable gain by P&G. While P&G generally would recognize gain as if it had sold the shares of Galleria Company common stock distributed to P&G shareholders in the Distribution for an amount equal to the fair market value of such stock, P&G has agreed under the Tax Matters Agreement among P&G, Galleria Company, Coty and Merger Sub to make a protective election under section 336(e) of the Code with respect to the Distribution which generally causes a deemed sale of Galleria Company’s assets upon a taxable Distribution. In such case, to the extent that P&G is responsible for the resulting transaction taxes, Coty generally would be required to make periodic payments to P&G equal to the tax savings arising from a “step up” in the tax basis of Galleria Company’s assets as a result of the protective election under section 336(e) of the Code taking effect.

Under the Tax Matters Agreement, the Coty Group would be required to indemnify P&G against tax-related losses (e.g., increased taxes, penalties and interest required to be paid by P&G) if the Distribution were taxable to P&G as a result of the acquisition of a 50% or greater interest (by vote or value) in Coty as part of a plan or series of related transactions that included the Distribution, except where such acquisition would not have been taxable but for P&G’s breach of certain provisions described in the Tax Matters Agreement. In addition, the Coty Group would be required to indemnify P&G for any tax liabilities resulting from the failure of the Merger to qualify as a reorganization under section 368(a) of the Code or the failure of the Distribution to qualify as a tax-free reorganization under sections 355 and 368(a) of the Code (including, in each case, failure to so qualify under a similar provision of state or local law) to the extent that such failure is attributable to a breach of certain representations and warranties by Coty or certain actions or omissions of the Coty Group. Tax-related losses attributable both to actions or omissions by the Coty Group, on the one hand, and certain actions or omissions by P&G, on the other hand, would be shared according to the relative fault of Coty and P&G. If the Coty Group is required to indemnify P&G in the event of a taxable Distribution, this indemnification obligation would be substantial and could have a material adverse effect on Coty, including with respect to its financial condition and results of operations. Except as described above, P&G would not be entitled to indemnification under the Tax Matters Agreement with respect to any taxable gain recognized in the Distribution. To the extent that Coty has any liability for any taxes of P&G, Galleria Company or any of their affiliates with respect to the Transactions

 

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that do not result from actions or omissions for which the Coty Group is liable as described above, P&G must indemnify Coty for such tax-related losses.

Coty could be adversely affected by significant restrictions following the Transactions in order to avoid tax-related liabilities.

The Tax Matters Agreement will require that Coty and Galleria Company, for a two-year period following the closing of the Merger, generally avoid taking certain actions. These limitations are designed to restrict actions that might cause the Distribution to be treated under section 355(e) of the Code as part of a plan under which a 50% or greater interest (by vote or value) in Coty is acquired or that could otherwise cause the Distribution, Merger and/or certain related transactions to become taxable to P&G. Unless Coty delivers an unqualified opinion of tax counsel reasonably acceptable to P&G, confirming that a proposed action would not cause certain of the Transactions to become taxable, Coty and Galleria Company are each generally prohibited or restricted during the two-year period following the closing of the Merger from:

 

    subject to specified exceptions, issuing stock (or stock equivalents) or recapitalizing, repurchasing, redeeming or otherwise participating in acquisitions of its stock;

 

    amending its certificate of incorporation or other organizational documents to affect the voting rights of its stock;

 

    merging or consolidating with another entity, or liquidating or partially liquidating, except for any merger, consolidation, liquidation or partial liquidation that is disregarded for U.S. federal income tax purposes;

 

    discontinuing, selling, transferring or ceasing to maintain the Galleria Company active business under section 355(b) of the Code;

 

    taking any action that permits a proposed acquisition of Coty stock or Galleria Company stock to occur by means of an agreement to which none of Coty, Galleria Company or their affiliates is a party (including by soliciting a tender offer for Galleria Company stock or Coty stock, participating in or otherwise supporting any unsolicited tender offer for such stock or redeeming rights under a shareholder rights plan with respect to such stock); and

 

    engaging in other actions or transactions that could jeopardize the tax-free status of the Distribution, Merger and/or certain related transactions.

Under the Tax Matters Agreement, Coty and its affiliates would be required to indemnify P&G against tax-related losses (e.g., increased taxes, penalties and interest required to be paid by P&G) if the Galleria Transfer, taken together with the Distribution, fails to qualify for tax-free treatment as a result of the direct or indirect acquisition of a 50% or greater interest (by vote or value) in Coty as part of a plan or series of related transactions that included the Distribution, except where such acquisition would not have been taxable but for P&G’s breach of certain provisions described in the Tax Matters Agreement.

Due to these restrictions and indemnification obligations under the Tax Matters Agreement, many strategic alternatives may be unavailable to Coty during the two-year period following the consummation of the Merger, which could have a material adverse effect on Coty’s liquidity and financial condition. Coty may be limited during this period in its ability to pursue strategic transactions, equity or convertible debt financings or other transactions that may maximize the value of Coty’s business and that may otherwise be in Coty’s best interests. Also, the restrictions and Coty’s potential indemnity obligation to P&G might discourage, delay or prevent a change of control transaction of Coty during this two-year period that Coty stockholders may consider favorable to its ability to pursue strategic alternatives.

Sales of shares of Coty common stock after the Transactions may negatively affect the market price of Coty common stock.

The shares of Coty common stock issued in the Merger to holders of shares of Galleria Company common stock will generally be eligible for immediate resale. The market price of Coty common stock could decline as a

 

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result of sales of a large number of shares of Coty common stock in the market after the completion of the Transactions or even the perception that these sales could occur.

It is expected that immediately after the completion of the Transactions, P&G shareholders or former P&G shareholders will hold approximately 54% of the fully diluted shares of Coty common stock and Coty’s existing stockholders will hold approximately 46% of the fully diluted shares of Coty common stock.

Currently, P&G shareholders include index funds that have performance tied to the Standard & Poor’s 500 Index, the Dow Jones Industrial Average or other stock indices, and institutional investors subject to various investing guidelines. Because Coty may not be included in these indices following completion of the Transactions or may not meet the investing guidelines of some of these institutional investors, these index funds and institutional investors may decide not to participate in the exchange offer, or, if the exchange offer is not fully subscribed, may decide to or may be required to sell the shares of Coty common stock that they receive in any subsequent pro rata distribution of the Remaining Shares following completion of an exchange offer. Alternatively, the index funds and institutional investors may participate in the exchange offer and may decide to or may be required to sell the shares of Coty common stock that they receive in the Merger. In addition, the investment fiduciaries of P&G’s defined contribution plans may decide to sell any Coty common stock that the trusts receive in the Transactions, or not participate in the exchange offer, in response to fiduciary obligations under applicable law. These sales, or the possibility that these sales may occur, could negatively affect the market price of Coty common stock and may make it more difficult for Coty to obtain additional capital by selling equity securities in the future at a time and at a price that it deems appropriate.

The calculation of the merger consideration will not be adjusted if there is a change in the value of P&G Beauty Brands or its assets or the value of Coty before the Merger is completed.

The calculation of the number of shares of Coty common stock to be distributed in the Merger will not be adjusted if there is a change in the value of P&G Beauty Brands or its assets or the value of Coty prior to the consummation of the Merger. While Coty will not be required to consummate the Merger if there has been any “material adverse effect” (as this term is described in “The Transaction Agreement—Representations and Warranties”) on P&G Beauty Brands, Coty will not be permitted to terminate the Transaction Agreement because of the occurrence of events that do not fall within this definition, including changes in the market price of Coty common stock or changes in the value of P&G Beauty Brands that do not otherwise constitute a material adverse effect on P&G Beauty Brands.

The Transactions may not be completed on the terms or timeline currently contemplated, or at all.

The completion of the Transactions is subject to numerous conditions, including (1) the completion of the Separation and Distribution, (2) the satisfaction of the Minimum Condition or the Revised Minimum Condition, as applicable, (3) the conversion of all outstanding shares of Coty’s class B common stock into shares of Coty common stock, (4) the receipt of written tax opinions from special tax counsel to P&G and special tax counsel to Coty, and (5) other customary conditions. See “The Transaction Agreement—Conditions to the Transactions” and “The Exchange Offer—Conditions for Completion of the Exchange Offer.” There is no assurance that the Transactions will be completed on the terms or timeline currently contemplated, or at all. P&G and Coty have expended and will continue to expend significant management time and resources and have incurred and will continue to incur significant expenses due to legal, advisory and financial services fees related to the Transactions. These expenses must be paid regardless of whether the Transactions are completed.

Governmental agencies may not approve the Merger or the related transactions necessary to consummate the Merger or may impose conditions to the approval of such transactions or require changes to the terms of such transactions. Any such conditions or changes could have the effect of delaying completion of the Transactions, imposing costs on or limiting the revenues of the combined company following the Transactions or otherwise reducing the anticipated benefits of the Transactions.

 

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Failure to complete the Transactions could materially and adversely impact the market price of Coty common stock as well as Coty’s business, liquidity, financial condition and results of operations.

If the Transactions are not completed for any reason, the price of Coty common stock may decline significantly. In addition, Coty is subject to additional risks, including, among others:

 

    substantial costs related to the Transactions, such as advisory, legal, accounting, integration and other professional fees and regulatory filing and financial printing fees, which must be paid regardless of whether the Transactions are completed; and

 

    potential disruption of the business of Coty and distraction of its workforce and management team.

The historical financial information of P&G Beauty Brands includes the results from certain brands that will not be transferred to Coty and may not be representative of P&G Beauty Brands’ results if it had been operated independently of P&G and, as a result, may not be a reliable indicator of Galleria’s future results.

P&G Beauty Brands is currently operated as four distinct product categories of P&G, all of which have historically been part of P&G’s Beauty reportable segment. Consequently, the historical financial information of P&G Beauty Brands included in this prospectus reflects all direct costs as well as assumptions and allocations made by P&G. While the historical financial information of P&G Beauty Brands includes results from each of the fine fragrance brands owned or licensed by P&G during the applicable periods or at the applicable dates, the Excluded Brands (the Dolce & Gabbana and Christina Aguilera fragrance license, the latter of which was acquired by Elizabeth Arden, Inc. on July 29, 2016) will not be transferred to Coty in the Transactions as P&G and Coty did not obtain the requisite licensor consents for such a transfer. The historical financial information of P&G Beauty Brands also includes results for the Divested Brands for periods prior to the respective dates of disposition. Activities related to the Excluded Brands and the Divested Brands collectively accounted for $506 million of P&G Beauty Brands’ net sales and $91 million of P&G Beauty Brands’ net income for the fiscal year ended June 30, 2016. The net income related to the Excluded Brands and the Divested Brands does not reflect a Dolce & Gabbana intangible asset impairment charge of $42 million and a termination fee of $73 million relating to that brand license. Coty anticipates a negative impact to the profitability of the Galleria business as a result of excluding the Excluded Brands because certain Fine Fragrance divisional costs in the Excluded Brands results will transfer with the Galleria business as a part of the Merger.

In addition, the historical financial position, results of operations and cash flows of P&G Beauty Brands presented in this prospectus may be different from those that would have resulted had P&G Beauty Brands been operated independently of P&G or by a company other than P&G during the applicable periods or at the applicable dates. For example, in preparing P&G Beauty Brands financial statements, P&G made allocations of costs and P&G corporate expenses that were deemed to be attributable to P&G Beauty Brands. However, these costs and expenses reflect the costs and expenses attributable to P&G Beauty Brands operated as part of a larger organization and do not reflect costs and expenses that would be incurred by P&G Beauty Brands had it been operated independently and may not reflect costs and expenses that would have been incurred had P&G Beauty Brands been supported as a subsidiary of Coty.

As a result of the foregoing, the historical financial information of P&G Beauty Brands may not be a reliable indicator of Galleria’s future results.

The unaudited condensed combined pro forma financial statements of Coty and P&G Beauty Brands are not intended to reflect what actual results of operations and financial condition would have been had Coty and Galleria Company been a combined company for the periods presented, and therefore these results may not be indicative of Coty’s future operating performance.

Because Coty will acquire Galleria only upon completion of the Transactions, there is no available historical financial information that consolidates the financial results for Coty and Galleria. The historical financial statements contained or incorporated by reference in this prospectus consist of the separate financial statements of P&G, P&G Beauty Brands and Coty.

 

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The unaudited condensed combined pro forma financial statements presented in this prospectus are for illustrative purposes only and are not intended to, and do not purport to, represent what Coty’s actual results or financial condition would have been if the Transactions had occurred on the relevant date. In addition, such unaudited condensed combined pro forma financial statements are based in part on certain assumptions regarding the Transactions, including the amounts to be incurred under the Galleria Senior Secured Credit Facilities in the Recapitalization, that Coty believes are reasonable. These assumptions, however, are only preliminary and will be updated only after the completion of the Transactions. The unaudited condensed combined pro forma financial statements have been prepared using the acquisition method of accounting, with Coty considered the acquirer of P&G Beauty Brands. Under the acquisition method of accounting, the purchase price is allocated to the underlying tangible and intangible assets acquired and liabilities assumed based on their respective fair values with any excess purchase price allocated to goodwill. The pro forma purchase price allocation was based on an estimate of the fair values of the tangible and intangible assets and liabilities of P&G Beauty Brands. In arriving at the estimated fair values, Coty has considered preliminary reports of independent consultants which were based on a preliminary and limited review of the assets and liabilities related to P&G Beauty Brands. Following the effective date of the Merger, Coty expects to complete the purchase price allocation after considering the fair value of P&G Beauty Brands’ assets and liabilities at the level of detail necessary to finalize the required purchase price allocation. The final purchase price allocation may be different than that reflected in the pro forma purchase price allocation presented herein, and this difference may be material. If the portion of the purchase price allocated to goodwill differs in any material respect from the pro forma purchase price allocation, Coty’s earnings may be impacted.

The unaudited condensed combined pro forma financial statements do not reflect all of the costs of integration activities or transaction-related costs or incremental capital spending that Coty’s management believes are necessary to realize the anticipated synergies from the Transactions, nor do they reflect all of the anticipated benefit from those synergies. Accordingly, the pro forma financial information included in this prospectus does not reflect what Coty’s results of operations or operating condition would have been had Coty and P&G Beauty Brands been a consolidated entity during all periods presented, or what Coty’s results of operations and financial condition will be in the future.

Tendering P&G shareholders may receive a reduced premium or may not receive any premium in the exchange offer.

The exchange offer is designed to permit the exchange of shares of P&G common stock for shares of Galleria Company common stock at a discount of 7.0%, calculated as set forth in this prospectus, to the per-share equivalent value of Coty common stock. Stated another way, for each $1.00 of your shares of P&G common stock accepted in the exchange offer, you will receive approximately $1.075 of shares of Galleria Company common stock. The value of the shares of P&G common stock will be based on the Average P&G Stock Price and the value of Galleria Company common stock will be based on the Average Coty Stock Price.

The number of shares a tendering P&G shareholder can receive is, however, subject to an upper limit of 3.9033 shares of Galleria Company common stock for each share of P&G common stock accepted for exchange in the exchange offer. As a result, you may receive less than $1.075 of shares of Galleria Company common stock for each $1.00 of shares of P&G common stock, depending on the Average P&G Stock Price and the Average Coty Stock Price. Because of the limit on the number of shares of Galleria Company common stock you may receive in the exchange offer, if there is a drop of sufficient magnitude in the trading price for Coty common stock relative to the trading price for P&G common stock, or if there is an increase of sufficient magnitude in the trading price for P&G common stock relative to the trading price for Coty common stock, you may not receive $1.075 of shares of Galleria Company common stock for each $1.00 of shares of P&G common stock, and could receive much less.

In addition, there is no assurance that holders of shares of P&G common stock that are exchanged for shares of Galleria Company common stock in the exchange offer will be able to sell the shares of Coty common stock after receipt in the Merger at prices comparable to the Average Coty Stock Price.

 

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There may also be circumstances under which you would receive fewer shares of Galleria Company common stock, and therefore effectively fewer shares of Coty common stock, than you would have received if the exchange ratio were determined using the closing prices for P&G common stock and Coty common stock on the Expiration Date.

If the trading price for P&G common stock were to increase during the last two trading days of the exchange offer period, the Average P&G Stock Price would likely be lower than the closing price for P&G common stock on the Expiration Date. As a result, you may receive fewer shares of Galleria Company common stock, and therefore effectively fewer shares of Coty common stock, for each $1.00 of shares of P&G common stock than you would have if the Average P&G Stock Price were calculated on the basis of the closing price of P&G common stock on the Expiration Date or on the basis of an Averaging Period that includes the last two trading days of the exchange offer period. Similarly, if the trading price for Coty common stock were to decrease during the last two trading days of the exchange offer period, the Average Coty Stock Price would likely be higher than the closing price for Coty common stock on the Expiration Date. Coty’s smaller market capitalization and fewer number of stockholders as compared to P&G may contribute to greater stock price volatility. Any decrease in the trading price for Coty common stock as described above could result in your receiving fewer shares of Galleria Company common stock, and therefore effectively fewer shares of Coty common stock, for each $1.00 of shares of P&G common stock than you would otherwise receive if the Average Coty Stock Price were calculated on the basis of the closing price for Coty common stock on the Expiration Date or on the basis of an Averaging Period that includes the last two trading days of the exchange offer period.

The trading prices for Coty common stock may not be an appropriate proxy for the prices of shares of Galleria Company common stock.

The calculated per-share value of Galleria Company common stock for purposes of the exchange offer is based on the trading prices for Coty common stock, which may not be an appropriate proxy for the prices of shares of Galleria Company common stock. There is currently no trading market for shares of Galleria Company common stock and no such market will be established in the future. As promptly as practicable following the completion of the Distribution, Merger Sub will be merged with and into Galleria Company, with Galleria Company surviving the Merger and becoming a wholly owned subsidiary of Coty. In the Merger, each outstanding share of Galleria Company common stock will be converted automatically into the right to receive one share of Coty common stock. However, there can be no assurance that shares of Coty common stock after the issuance of shares of Galleria Company common stock and the Merger will trade on the same basis as shares of Coty common stock traded prior to the completion of the Transactions. In addition, it is possible that the trading prices for Coty common stock prior to the consummation of the Merger will not fully reflect the anticipated value of shares of Coty common stock after the Merger. For example, trading prices for Coty common stock during the Averaging Period could reflect some uncertainty as to the timing or consummation of the Merger or could reflect trading activity by investors seeking to profit from market arbitrage.

Following the conversion of shares of Galleria Company common stock into shares of Coty common stock in connection with the Merger, the former holders of shares of Galleria Company common stock may experience a delay before receiving their shares of Coty common stock or their cash in lieu of fractional shares, if any.

Following the conversion of shares of Galleria Company common stock into shares of Coty common stock, the former holders of shares of Galleria Company common stock will receive their shares of Coty common stock or their cash in lieu of fractional shares, if any, only upon surrender of all necessary documents, duly executed, to the transfer agent. Until the distribution of the shares of Coty common stock to the individual shareholder has been completed, the relevant holder of shares of Coty common stock may not be able to sell its shares of Coty common stock. Consequently, if the market price for Coty common stock decreases during that period, the relevant shareholder may not be able to avoid losses by selling its shares of Coty common stock. Further, regardless of the price of Coty common stock, the relevant shareholder may not be able to raise cash by selling

 

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its shares of Coty common stock. Similarly, the former holders of shares of Galleria Company common stock who received cash in lieu of fractional shares will not be able to invest the cash until the distribution to the relevant shareholder has been completed, and they will not receive interest payments for that time period.

P&G shareholders’ investment will be subject to different risks after the exchange offer, regardless of whether they elect to participate in the exchange offer.

P&G shareholders’ investment will be subject to different risks if the exchange offer is completed.

 

    If P&G shareholders exchange all of their shares of P&G common stock and the exchange offer is not oversubscribed, then they will no longer have an interest in P&G, but instead they will directly own an interest in Coty. As a result, their investment will be subject exclusively to risks associated with Coty and not risks associated solely with P&G. Coty’s business is less diversified than that of P&G and Coty’s market capitalization is not as large as that of P&G. Accordingly, Coty’s business may be more susceptible to the risks associated with the beauty business. Coty’s smaller market capitalization may also subject its stockholders to greater stock price volatility as compared to the volatility generally experienced by P&G shareholders.

 

    If P&G shareholders exchange all of their shares of P&G common stock and the exchange offer is oversubscribed, then the exchange offer will be subject to the proration procedures described under “The Transactions” and, unless their odd-lot tender is not subject to proration, P&G shareholders will own an interest in both P&G and Coty. As a result, their investment will continue to be subject to risks associated with both P&G and Coty.

 

    If P&G shareholders exchange some, but not all, of their shares of P&G common stock, then regardless of whether the exchange offer is fully subscribed, the number of shares of P&G common stock they own will decrease, while the number of shares of Galleria Company common stock, and therefore effectively shares of Coty common stock, they own will increase. As a result, their investment will continue to be subject to risks associated with both P&G and Coty.

 

    If P&G shareholders do not exchange any of their shares of P&G common stock and the exchange offer is fully subscribed, then their interest in P&G will increase on a percentage basis, while their indirect ownership in Galleria Company will be eliminated. As a result, their investment will be subject exclusively to risks associated with P&G and not risks associated solely with Galleria Company because P&G will no longer have an investment in Galleria Company. P&G Beauty Brands accounted for 7.5% of P&G’s net sales in fiscal 2016. Following completion of the Transactions, P&G Beauty Brands will no longer be owned by P&G.

 

    If P&G shareholders remain shareholders of P&G following the completion of the exchange offer and the exchange offer is not fully subscribed, then they may receive shares of Coty common stock after the distribution of the subsequent pro rata dividend described under “The Transactions” (although they may instead receive only cash in lieu of a fractional share). As a result, their investment may be subject to risks associated with both P&G and Coty.

Whether or not P&G shareholders tender their shares of P&G common stock, the shares they then hold after the completion of the exchange offer will reflect a different investment from the investment they previously held as a result of the Transactions.

Coty expects to incur significant costs associated with the Transactions that could affect the period-to-period operating results of Coty following the completion of the Transactions.

At the time of announcement of the Transactions in July 2015, Coty anticipated that it would incur charges of an aggregate of approximately $500 million and capital expenditures of approximately $400 million as a result of costs associated with the Transactions. Coty currently anticipates that it will incur a total of approximately $1.2 billion of operating expenses and capital expenditures of approximately $500 million. Some of the factors

 

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affecting the costs associated with the Transactions include the timing of the completion of the Transactions, the resources required in integrating Galleria with Coty’s existing businesses and the length of time during which transition services are provided to Coty by P&G. The amount and timing of this charge could adversely affect Coty’s liquidity, cash flows and period-to-period operating results, which could result in a reduction in the market price of shares of Coty common stock.

Any delay in completing the Transactions may reduce or eliminate the benefits that Coty expects to achieve.

The Transactions are subject to a number of conditions beyond P&G’s and Coty’s control that may prevent, delay or otherwise materially adversely affect the completion of the Transactions. P&G and Coty cannot predict whether and when these conditions will be satisfied. Any delay in completing the Transactions could cause the combined company not to realize some or all of the synergies that P&G and Coty expect to achieve if the Transactions are successfully completed within the expected time frame.

The opinions obtained by Coty’s board of directors from its financial advisors do not and will not reflect changes in circumstances after the date of such opinions.

On July 8, 2015, Morgan Stanley and Barclays each delivered an opinion to Coty’s board of directors that, as of July 8, 2015, based on and subject to the various assumptions, procedures, matters, qualifications and limitations on the scope of the review undertaken by each of Morgan Stanley and Barclays as set forth in their respective written opinions, the exchange ratio pursuant to the Transaction Agreement was fair from a financial point of view to Coty. Changes in the operations and prospects of P&G, P&G Beauty Brands or Coty, general market and economic conditions and other factors that may be beyond the control of P&G and Coty, and on which the opinions of Morgan Stanley and Barclays were based, may alter the value of P&G, P&G Beauty Brands or Coty or the prices of shares of P&G common stock or Coty common stock by the time the Transactions are completed. Coty has not obtained, and does not expect to request, updated opinions from its financial advisors. Neither Morgan Stanley’s nor Barclays’ opinion speaks to the time when the Transactions will be completed or to any date other than the date of such opinion. As a result, the opinions do not and will not address the fairness, from a financial point of view, of the exchange ratio pursuant to the Transaction Agreement at any time other than July 8, 2015.

In preparing their respective opinions delivered to Coty’s board of directors on July 8, 2015, each of Morgan Stanley and Barclays assumed that all relevant licenses of P&G Beauty Brands, including the Excluded Brands, would transfer with Galleria Company to Coty. However, the assets and liabilities transferred by P&G and assumed by Galleria Company will not include those relating to the Excluded Brands. At the request of the management of Coty and based on specific projections provided by the management of Coty, the financial advisors performed, for illustrative purposes only, a sensitivity analysis to illustrate the impact of potential deviations from the assumption that all relevant licenses of P&G Beauty Brands, including the Excluded Brands, transfer with Galleria Company to Coty. This analysis did not, nor was it intended to, correspond to an analysis of the Excluded Brands not transferring with Galleria Company. For further information regarding the financial effect of the Excluded Brands not transferring with Galleria Company, see the sections of this prospectus entitled “The Transaction Agreement—Recapitalization,” “—The Parties to the Transactions—Galleria Co.” and “Information on P&G Beauty Brands—Overview.” At the direction of Coty, the financial advisors further assumed that, in accordance with the terms of the Transaction Agreement, the Coty stockholders would own 48% of the fully diluted shares of Coty common stock immediately following the acquisition of Galleria Company. However, in connection with subsequent share repurchases by Coty, P&G and Coty agreed that such repurchased shares would be treated as if they remained outstanding for purposes of the Transaction Agreement by modifying the definition of “fully diluted basis” within the Transaction Agreement, although such shares would not be included in a comparable GAAP measure or otherwise reflected in “fully diluted” as that term is otherwise used in this prospectus and defined under “Helpful Information.” As a result, existing Coty stockholders are currently expected to own approximately 46% of the fully diluted shares of Coty common stock as that term is otherwise used in this prospectus and defined under “Helpful Information.”

 

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In determining whether to proceed with the Transactions, P&G’s board of directors did not seek or obtain a fairness opinion from a financial advisor.

In determining whether to proceed with the Transactions, P&G’s board of directors did not seek or obtain a third-party valuation of P&G Beauty Brands or a fairness opinion from a financial advisor. The opinions of Morgan Stanley and Barclays issued in connection with the Merger and included as appendices to this prospectus were rendered for the benefit of Coty’s board of directors, in its capacity as such, and addressed only the fairness from a financial point of view to Coty of the exchange ratio pursuant to the Transaction Agreement as of the date of the opinions. Neither Morgan Stanley’s opinion nor Barclays’ opinion addressed any other aspect of the Transactions, including the fairness of the amount or nature of the compensation to P&G or its shareholders.

Risks Relating to Coty, Including Galleria After the Transactions

The following discussion supplements and, where applicable, updates the discussion of risk factors that could adversely affect Coty’s business included in Coty’s Annual Report on Form 10-K for the fiscal year ended June 30, 2016. Those risks are relevant to Coty on a standalone basis and are expected to be risks to the combined company following the Transactions.

The integration of Galleria with Coty may not be successful or anticipated benefits from the Transactions may not be realized.

After completion of the Transactions, Coty will have significantly more sales, assets and employees than it did prior to the Transactions. The integration process will require Coty to expand the scope of its operations and financial, accounting and control systems. Coty’s management will be required to devote a substantial amount of time and attention to the process of integrating Galleria with Coty’s business operations. The integration process is often difficult and management involvement is inherent in that process. These difficulties include:

 

    integrating the operations of Galleria while carrying on the ongoing operations of Coty’s business;

 

    managing a significantly larger company than before the Transactions;

 

    coordinating businesses located in new geographic regions, including significantly increased international operations;

 

    operating a hair color business, which is a new category in the beauty industry for Coty;

 

    operating nine additional large manufacturing facilities in the United States, Germany, Thailand, Mexico, Russia and the United Kingdom;

 

    maintaining and protecting the competitive advantages of Galleria, including the trade secrets, know-how and intellectual property related to its production processes;

 

    integrating business cultures and processes;

 

    retaining personnel associated with Galleria;

 

    implementing a new system for the distribution and sale of Galleria products to replace the P&G direct sales force, and integrating that system with Coty’s current sales and distribution organization;

 

    implementing uniform standards, controls, procedures, policies and information systems and minimizing costs associated with such matters; and

 

    integrating information, purchasing, accounting, finance, sales, billing, payroll and regulatory compliance systems.

Coty may not be able to successfully or cost-effectively integrate Galleria. While under the Transition Services Agreement P&G will provide limited transition services to Coty while Galleria is being integrated into Coty, the term of the Transition Services Agreement will be for a limited period of time following the completion of the Transactions, which may not be sufficiently long for purposes of the integration. The process of integrating Galleria into Coty’s operations may cause an interruption of, or loss of momentum in, the activities of Galleria’s

 

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or Coty’s businesses. If Coty’s management is not able to effectively manage the integration process, or if any significant business activities are interrupted as a result of the integration process, Coty’s business, financial condition and results of operations may be materially adversely affected.

The combined company may not achieve some or any of the synergies that Coty expects to achieve if the Transactions are successfully completed. Even if Coty is able to combine the two business operations, it may not be possible to realize the full benefits, including increased sales volume, that Coty currently expects to result from the Transactions, or to realize those benefits within the time frame that is currently expected. For example, the elimination of duplicative costs may not be possible or may take longer than anticipated, or the benefits from the Transactions may be offset by unanticipated costs or integration delays. In addition, the benefits of the Transactions may be offset by increased operating costs relating to changes in commodity or energy prices, increased competition or other risks and uncertainties. If Coty fails to realize the benefits it anticipates from the Transactions, Coty’s results of operations may be adversely affected.

Coty may be unable to provide the same types and level of benefits and services or access to equivalent financial strength and resources to Galleria Company that historically have been provided to P&G Beauty Brands by P&G or may be unable to provide them at the same cost.

As part of P&G’s Beauty reportable segment, P&G Beauty Brands has been able to receive benefits and services from P&G and has been able to benefit from P&G’s financial strength and extensive business relationships. After the completion of the Transactions, Galleria, which includes the assets and liabilities of P&G Beauty Brands other than those exclusively relating to the Excluded Brands, will be owned by Coty and will no longer benefit from P&G’s resources. While Coty will enter into separation-related agreements under which P&G will agree to provide certain transition and site-related services for a maximum period (including permitted extensions) of up to 12 months following the Distribution, it cannot be assured that Coty will be able to adequately replace those resources or replace them at the same cost. If Coty is unable to replace the resources provided by P&G or is unable to replace them at the same cost or is delayed in replacing the resources provided by P&G, Coty’s business, financial condition and results of operations may be materially adversely affected.

If the operating results for Galleria following the Transactions are below Coty’s expectations, Coty may not achieve the increases in revenues and net earnings that Coty expects as a result of the Transactions.

Coty has projected that it will derive a significant portion of its revenues and net earnings from the operations of Galleria after the Transactions. Therefore, any negative impact on those business operations could harm Coty’s operating results. Some of the significant factors that could harm the operations of Galleria, and therefore harm the future combined operating results of Coty after the Transactions, include:

 

    increases in raw materials, energy and packaging costs for Galleria, including the cost of essential oils, alcohol and specialty chemicals;

 

    more intense competitive pressure from existing or new companies;

 

    difficulties meeting demand for Galleria products;

 

    fluctuations in the exchange rates in the jurisdictions in which the combined company operates;

 

    increases in promotional costs for Galleria; and

 

    a decline in the markets served by Galleria.

The Transactions will expose Coty to risks inherent in the hair color business, and risks inherent in those geographies where Galleria currently operates.

If consummated successfully, the Transactions would create one of the world’s largest beauty companies and would represent a significant transformation of Coty’s existing business. Upon completion of the Transactions, Coty would be subject to a variety of risks associated with the hair color business, in addition to

 

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those Coty already faces in the fragrance, color cosmetics and skin and body care businesses. These risks include changes in consumer preferences, volatility in the prices of raw materials, consumer perceptions of the brands, competition in the retail market and other risks. In addition, Coty will be exposed to risks inherent in operating in geographies in which Coty has not operated in or has been less present in the past.

Coty may be unable to manage its growth effectively, which would harm its business, results of operations and financial condition.

Following the Transactions, Coty plans to invest in Galleria to grow and leverage its increased scale to benefit its entire beauty portfolio. Coty’s growth strategy, including its strategy with respect to Galleria, may place a strain on its management team, information systems, labor, manufacturing and distribution capacity. P&G Beauty Brands has experienced in the past, and Galleria may experience in the future, manufacturing capacity constraints, particularly in periods where customer demand exceeds management’s expectations. Coty may determine that it is necessary to invest substantial capital in order to secure additional manufacturing and distribution capacity to accommodate the expected growth of its business. There may also be a delay between Coty’s decision to invest in its manufacturing and distribution capacity and the time when such capacity is available for use. If Coty does not make, or is unable to make, the necessary expenditures to accommodate its future growth, or if a significant amount of time passes between Coty’s decision to invest and the time in which such capacity is available for use, it may not be successful in executing its growth strategy. If Coty is unable to effectively address any future capacity constraints within its business, or otherwise manage its future growth, its business, results of operations and financial condition may be adversely affected.

The United Kingdom’s impending departure from the European Union could have a material adverse effect on Coty.

On June 23, 2016, the United Kingdom held a referendum in which a majority of voters voted to exit the European Union, commonly referred to as “Brexit.” As a result of the referendum, it is expected that the British government will commence negotiations to determine the terms of the United Kingdom’s withdrawal from the European Union. A withdrawal could, among other outcomes, disrupt the free movement of goods, services and people between the United Kingdom and the European Union, undermine bilateral cooperation in key geographic areas and significantly disrupt trade between the United Kingdom and the European Union or other nations as the United Kingdom pursues independent trade relations. In addition, Brexit could lead to legal uncertainty and potentially divergent national laws and regulations as the United Kingdom determines which European Union laws to replace or replicate. The effects of Brexit will depend on any agreements the United Kingdom makes to retain access to European Union or other markets either during a transitional period or more permanently. Given the lack of comparable precedent, it is unclear what financial, trade and legal implications the withdrawal of the United Kingdom from the European Union would have and how such withdrawal would affect Coty.

The announcement of Brexit caused significant volatility in global stock markets and currency exchange rate fluctuations, in particular in the value of the British pound and euro. The announcement of Brexit and the withdrawal of the United Kingdom from the European Union may also create global economic uncertainty, which may cause Coty’s customers to reevaluate their spending budgets. Any of these effects of Brexit, and others that Coty cannot anticipate, could adversely affect Coty’s business, results of operations and financial condition.

Changes in relationships between Galleria and its brand licensors, or failure to maintain those relationships, following the Transactions could have a material adverse effect on Coty.

The rights to market and sell certain fine fragrance brands are derived from licenses from unaffiliated third parties and its business is dependent upon the continuation and renewal of those licenses on favorable terms. As of June 30, 2016, P&G Beauty Brands maintained 12 brand license agreements, which collectively accounted for 36% of its net sales in fiscal 2016. With the exception of the Excluded Brands, P&G and Coty have obtained the

 

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consent of brand licensors, to the extent required in connection with the Transactions, for the transfer of the applicable brand licenses from P&G Beauty Brands to Coty in the Transactions. Notwithstanding, these brand licensors may reduce the scope of their relationship with Galleria in anticipation of the Transactions or with Coty following completion of the Transactions. Any such reduction, or Coty’s inability to renew a brand license agreement upon favorable terms or otherwise, could have a material adverse effect on Coty’s business, financial condition and results of operations following the Transactions and could limit Coty’s ability to achieve the anticipated benefits of the Transactions.

Coty relies on brand licensors to manage and maintain their brands, and there is no guarantee that the licensors will maintain their celebrity status or positive association among the consumer public.

Coty, including Galleria following completion of the Transactions, relies on its brand licensors to manage and maintain their brands. Many of these brand licenses are with celebrities whose public personae Coty believes are in line with its current business strategy. Since Coty does not maintain control over such celebrities’ brand and image, however, they are subject to change at any time without notice, and there can be no assurance that these celebrity licensors will maintain the appropriate celebrity status or positive association among the consumer public to maintain sales of products bearing their names and likeness at the projected sales levels. As a result of the Transactions, such brand licensors may wish to renegotiate or terminate their agreements given management change. Similarly, since Coty is not responsible for the brand or image of its designer licensors, sales of related products or projected sales of related products could suffer if the designer suffers a general decline in the popularity of its brands due to mismanagement, changes in fashion or consumer preferences, or other factors beyond the control of Coty.

The success of Coty is also partially dependent on the reputation of their respective brand licensors and the goodwill associated with their intellectual property. These licensors’ reputation or goodwill may be harmed due to factors outside Coty’s control, which could have a material adverse effect on Coty’s business, financial condition and results of operations. In addition, in the event that any of these licensors were to enter bankruptcy proceedings, Coty could lose its rights to use the intellectual property that the applicable licensors license Coty to use.

Coty’s brand licenses may be terminated if specified conditions are not met.

Coty’s and Galleria’s existing brand licenses run for varying periods with varying renewal options and may be terminated if certain conditions, such as royalty payments, are not met. These brand licenses impose various obligations on Coty and Galleria which Coty believes are common to many licensing relationships in the beauty industry. These obligations include:

 

    paying annual royalties on net sales of the licensed products;

 

    maintaining the quality of the licensed products and the image of applicable trademarks;

 

    permitting the licensor’s involvement in and, in some cases, approval of advertising, packaging and marketing plans related to licensed products;

 

    maintaining minimum royalty payments and/or minimum sales levels for the licensed products;

 

    actively promoting the sales of the licensed products;

 

    spending a certain amount of net sales on marketing and advertising for the licensed products;

 

    maintaining the integrity of the specified distribution channel for the licensed products;

 

    expanding the sales of the licensed products and/or the markets in which they are sold;

 

    agreeing not to enter into licensing arrangements with competitors of certain of Coty’s or Galleria’s licensors;

 

    indemnifying the licensor in the event of product liability or other claims related to Coty’s or Galleria’s products;

 

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    limiting assignment and sub-licensing to third parties without the licensor’s consent; and

 

    in some cases, requiring notice to, or approval by, the licensor of certain changes in control as a condition to continuation of a license.

If, following the Transactions, Coty breaches any of these obligations or any other obligations set forth in any of these brand license agreements, Coty’s rights under the applicable brand license agreements could be terminated, which could have a material adverse effect on Coty’s business, financial condition and results of operations.

Coty expects to guarantee a significant amount of debt as a result of the Transactions.

At the completion of the Transactions, to the extent the requirements of the Transaction Agreement are satisfied, Coty will guarantee Galleria Company’s obligations under the Galleria Senior Secured Credit Facilities. Galleria Company’s obligations are contractually agreed to be $2.9 billion, but are subject to specified adjustments, which may result in the incurred amount being significantly higher or lower. The terms of this debt, as well as the Coty Senior Secured Credit Facilities, will permit Coty to incur a substantial amount of additional indebtedness, including secured debt.

Coty’s ability to make scheduled payments under, or to refinance, its indebtedness depends on its financial and operating performance, which is subject to prevailing economic and competitive conditions and to specified financial, business and other factors beyond Coty’s control. Coty may not be able to maintain a level of cash flow from operations sufficient to permit it to pay the principal, premium, if any, and interest on its indebtedness. If Coty’s cash flows and capital resources are insufficient to fund its debt service obligations, Coty may be forced to reduce or delay capital expenditures, sell assets or operations, seek additional capital or restructure or refinance its indebtedness. Coty may not be able to take any of these actions, and these actions may not be successful or permit it to meet its scheduled debt service obligations and these actions may not be permitted under the terms of its existing or future debt agreements. In the absence of such operating results and resources, Coty could face liquidity problems and might be required to dispose of material assets or operations to meet its debt service and other obligations. Since Coty’s debt agreements restrict its ability to dispose of assets, it may not be able to consummate such dispositions, and this could result in its inability to meet its debt service obligations.

In addition, this indebtedness could have other important consequences, including:

 

    increasing Coty’s vulnerability to adverse economic, industry or competitive developments;

 

    exposing Coty to the risk of increased interest rates to the extent that its indebtedness bears interest at variable rates;

 

    making it more difficult to satisfy obligations with respect to Coty’s indebtedness, and any failure to comply with the obligations of any of its debt instruments, including restrictive covenants and borrowing conditions, could result in an event of default under the agreements governing the indebtedness;

 

    restricting Coty from making strategic acquisitions or causing it to make non-strategic divestitures;

 

    limiting Coty’s ability to obtain additional financing for working capital, capital expenditures, product development, debt service requirements, acquisitions and general corporate or other purposes; and

 

    placing Coty at a competitive disadvantage compared to competitors who are less highly leveraged and who therefore, may be able to take advantage of opportunities that its leverage prevents it from pursuing.

If new debt is added to Coty’s and its subsidiaries’ existing debt levels, the related risks that it now faces would increase.

 

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Coty’s debt facilities following completion of the Transactions will require Coty to continue to comply with specified financial covenants that may restrict its current and future operations and limit Coty’s flexibility and ability to respond to changes or take certain actions.

Coty remains dependent upon others for its financing needs, and Coty’s debt agreements currently contain, and will contain following the closing of the Transactions, restrictive covenants. The Coty Credit Agreement governing the Coty Senior Secured Credit Facilities contains, and following the Transactions the Galleria Credit Agreement governing the Galleria Senior Secured Credit Facilities will contain, covenants requiring Coty to maintain specific financial ratios and contain certain restrictions on Coty with respect to guarantees, liens, sales of certain assets, consolidations and mergers, affiliate transactions, indebtedness, dividends and other distributions and changes of control. There is a risk that these covenants could constrain execution of Coty’s business strategy and growth plans following the Transactions, including acquisitions. Should Coty decide to pursue an acquisition that requires financing that would violate Coty’s debt covenants, refusal of Coty’s lenders to permit waivers or amendments to Coty’s covenants could delay or prevent consummation of Coty’s plans. The Coty Senior Secured Credit Facilities will expire in 2022 and the Galleria Senior Secured Credit Facilities will expire seven years after the Galleria Financing Closing Date. There is no assurance that alternative financing or financing on as favorable terms will be found when these facilities expire.

Following the completion of the Transactions, JAB Cosmetics B.V. will remain Coty’s largest stockholder, owning approximately 36% of the fully diluted shares of Coty common stock, and will have the ability to exercise significant influence over decisions requiring Coty stockholder approval.

Coty is currently controlled by JAB Cosmetics, B.V., Lucresca SE (“Lucresca”) and Agnaten SE (“Agnaten”). Lucresca and Agnaten indirectly share voting and investment control over the shares of Coty common stock and Coty class B common stock held by JAB Cosmetics B.V. Following the completion of the Transactions, JAB Cosmetics B.V. will remain Coty’s largest stockholder, owning approximately 36% of the fully diluted shares of Coty common stock. As a result, JAB Cosmetics B.V., Lucresca and Agnaten will continue to have the ability to exercise significant influence over decisions requiring Coty stockholder approval, including the election of directors, amendments to Coty’s certificate of incorporation and approval of significant corporate transactions, such as a merger or other sale of Coty or its assets.

This concentration of ownership may have the effect of delaying, preventing or deterring a change in control of Coty and may negatively affect the market price of Coty common stock. Also, JAB Cosmetics B.V. and its affiliates are in the business of making investments in companies and may from time to time acquire and hold interests in businesses that compete indirectly with Coty. JAB Cosmetics B.V. or its affiliates may also pursue acquisition opportunities that are complementary to Coty’s business and, as a result, those acquisition opportunities may not be available to Coty.

 

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CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS

This prospectus, including the information incorporated by reference into this prospectus, contains forward-looking statements, such as projected operating results, earnings and cash flows, that are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from any future results, performance or achievements expressed or implied by those forward-looking statements.

These forward-looking statements reflect P&G’s, Galleria Company’s and Coty’s current views with respect to, among other things, operations and financial performance. All statements in this prospectus that are not historical facts, including statements about P&G’s, Galleria Company’s and Coty’s beliefs or expectations, are forward-looking statements. Words or phrases such as “anticipate,” “estimate,” “plan,” “project,” “expect,” “believe,” “intend,” “foresee,” “forecast,” “will,” “may,” “outlook,” “target” or other similar words or phrases used in connection with any discussion of future plans, actions or events, including with respect to the Transactions, generally identify forward-looking statements.

You should understand that the risks, uncertainties, factors and assumptions listed and discussed in this prospectus, including the following important factors and assumptions, could affect the future results of Coty following the Transactions and could cause actual results to differ materially from those expressed in the forward-looking statements:

 

    the effect of general economic conditions;

 

    inability to complete the Transactions;

 

    the integration of Galleria with Coty’s business, operations and culture and the ability to realize synergies and other potential benefits of the Transactions within the time frames currently contemplated, including planned organizational changes and their effects;

 

    Coty’s strategy and future financial or operational performance;

 

    performance of Coty’s and Galleria’s manufacturing and production operations including unexpected maintenance requirements or interruptions;

 

    the inability of Coty to manage its growth effectively;

 

    the level of competition from domestic and foreign companies;

 

    fluctuations in transportation and distribution costs;

 

    the loss of significant customers or a substantial reduction in orders from these customers or the bankruptcy of any such customer or the inability to obtain new customers;

 

    the impact of the illegal distribution and sale by third parties of counterfeit versions of Coty’s and Galleria’s products;

 

    dependence on information technology and the inability to protect against service interruptions, data corruption, cyber-based attacks or network security breaches;

 

    the outcome or impact of pending or threatened litigation;

 

    the anticipated benefits to Coty of other acquisitions or divestitures;

 

    the success and cost of marketing and sales programs and other growth initiatives and strategies intended to promote growth in Coty’s business, which will include Galleria after the completion of the Transactions;

 

    general competitive activity in the market, including competitors’ pricing practices and promotional spending levels;

 

    the concentration of Coty’s business, which will include Galleria after the completion of the Transactions, with key customers and the ability to manage and maintain key customer relationships;

 

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    the timing, amount and allocation of Coty’s capital expenditures, restructuring and merger and integration costs;

 

    the outcome of current and future tax examinations and other tax matters, and their related impact on Coty’s tax positions;

 

    foreign currency and interest rate fluctuations;

 

    inventory levels and returns and cost of goods;

 

    other factors affecting share prices and capital markets generally and domestic and international developments;

 

    other goals and targets and statements of the assumptions underlying or relating to any such statements; and

 

    the other factors described under “Risk Factors” in this prospectus or incorporated by reference herein.

These factors should not be construed as exhaustive, and should be read in conjunction with the other cautionary statements included in this prospectus or incorporated by reference herein. The inclusion of this forward-looking information should not be regarded as a representation by P&G, Galleria Company or Coty or any other person that the future plans, estimates or expectations that P&G, Galleria Company or Coty contemplate will be achieved. Although P&G, Galleria Company and Coty believe that the expectations reflected in the forward-looking statements are reasonable, they should not be viewed as guarantees of future results, events, favorable circumstances or conditions, levels of activity or performance. Actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements, and you are cautioned not to place undue reliance on these statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include those described under “Risk Factors” in this prospectus or incorporated by reference herein.

You are cautioned not to unduly rely on such forward-looking statements, which speak only as of the date made, when evaluating the information presented in this prospectus. None of P&G, Galleria Company or Coty assumes any obligation to update or revise these forward-looking statements to reflect new events or circumstances, except as required by law.

 

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THE EXCHANGE OFFER

Terms of the Exchange Offer

General

P&G is offering to exchange all shares of Galleria Company common stock, that are owned by P&G, for shares of P&G common stock, at an exchange ratio to be calculated in the manner described below, on the terms and conditions and subject to the limitations described below and in the letter of transmittal (including the instructions thereto), at or prior to 12:00 midnight, New York City time, on September 29, 2016, unless the exchange offer is extended or earlier terminated. The last day on which tenders will be accepted, whether on September 29, 2016 or any later date to which the exchange offer is extended, is referred to in this prospectus as the “Expiration Date.” You may tender all, some or none of your shares of P&G common stock.

P&G is offering 409,726,299 shares of Galleria Company common stock in the exchange offer. In the exchange offer, P&G is offering all the shares of Galleria Company common stock it holds on the date of completion of the exchange offer. The number of shares of P&G common stock that will be accepted if the exchange offer is completed will depend on the final exchange ratio, the number of shares of Galleria Company common stock offered and the number of shares of P&G common stock validly tendered and not properly withdrawn.

P&G’s obligation to complete the exchange offer is subject to important conditions that are described in the section entitled “—Conditions for Completion of the Exchange Offer.”

For each share of P&G common stock that you validly tender in the exchange offer and do not properly withdraw, you will receive a number of shares of Galleria Company common stock at a discount of 7.0%, subject to an upper limit of 3.9033 shares of Galleria Company common stock per share of P&G common stock. Stated another way, subject to the upper limit described below, for each $1.00 of shares of P&G common stock accepted in the exchange offer, you will receive approximately $1.075 of shares of Galleria Company common stock based on the Average P&G Stock Price and the Average Coty Stock Price as determined by P&G.

The Average P&G Stock Price will be equal to the simple arithmetic average of the daily VWAP of shares of P&G common stock on the NYSE during the Averaging Period as determined by P&G; and the Average Coty Stock Price will be equal to the simple arithmetic average of the daily VWAP of shares of Coty common stock on the NYSE during the Averaging Period as determined by P&G.

The daily VWAP as determined by P&G will be definitive and may be different from other sources of volume-weighted average prices or investors’ or security holders’ own calculations of volume-weighted average prices.

Upper Limit

The number of shares of Galleria Company common stock a tendering P&G shareholder can receive is subject to an upper limit of 3.9033 shares of Galleria Company common stock for each share of P&G common stock accepted in the exchange offer. If the upper limit is in effect, you will receive less than $1.075 of shares of Galleria Company common stock for each $1.00 of shares of P&G common stock that you tender, and this difference could be significant. P&G set the upper limit to ensure that a change in the relative price of P&G common stock and Coty common stock, whether as a result of an increase in the price of P&G common stock, a decrease in the price of Coty common stock or a combination thereof, would not result in an unduly high number of shares of Galleria Company common stock being exchanged for each share of P&G common stock accepted in the exchange offer, preventing a situation that might significantly reduce the benefits of the exchange offer to P&G and its continuing shareholders due to a smaller number of outstanding shares being acquired by P&G in the exchange offer.

 

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Pricing Mechanism

The terms of the exchange offer are designed to result in you receiving $1.075 of shares of Galleria Company common stock for each $1.00 of shares of P&G common stock tendered, based on the Average P&G Stock Price and the Average Coty Stock Price determined as described above and subject to the upper limit. Regardless of the final exchange ratio, the terms of the exchange offer would always result in you receiving approximately $1.075 of shares of Galleria Company common stock for each $1.00 of shares of P&G common stock, based on the Average P&G Stock Price and the Average Coty Stock Price, so long as the limit is not in effect.

In other words, the following formula will be used to calculate the number of shares of Galleria Company common stock you will receive for shares of P&G common stock accepted in the exchange offer:

 

Number of shares

of Galleria

Company common

stock

  =  

Number of shares of

P&G common stock tendered and accepted, multiplied by the lesser of:

  (1) 3.9033   and   (2)  

the Average

P&G Stock

Price divided by

93.0% of the

Average Coty

Stock Price

The Average P&G Stock Price for purposes of the exchange offer will equal the simple arithmetic average of the daily VWAPs of shares of P&G common stock on the NYSE during the Averaging Period, which has a period of three consecutive trading days (currently expected to be September 23, 2016, September 26, 2016 and September 27, 2016) ending on and including the second trading day immediately preceding the Expiration Date. The value of a share of Galleria Company common stock for purposes of the exchange offer will equal the simple arithmetic average of the daily VWAPs of Coty common stock on the NYSE during the same Averaging Period.

To help illustrate the way this calculation works, below are two examples:

Example 1:    Assuming that the average of the daily VWAPs during the Averaging Period is $87.6708 per share of P&G common stock and $27.2853 per share of Coty common stock, you would receive 3.4550 shares ($87.6708 divided by 93.0% of $27.2853) of Galleria Company common stock for each share of P&G common stock accepted in the exchange offer. In this example, the upper limit of 3.9033 shares of Galleria Company common stock for each share of P&G common stock would not apply.
Example 2:    Assuming that the average of the daily VWAPs during the Averaging Period is $96.4378 per share of P&G common stock and $24.5568 per share of Coty common stock, the limit would apply and you would only receive 3.9033 shares of Galleria Company common stock for each share of P&G common stock accepted in the exchange offer because the upper limit is less than 4.2227 shares ($96.4378 divided by 93.0% of $24.5568) of Galleria Company common stock for each share of P&G common stock.

P&G will maintain a website at www.dfking.com/pg that provides the daily VWAP of both P&G common stock and Coty common stock, together with indicative exchange ratios, during the exchange offer period. The indicative exchange ratios will be updated on the website each day by 4:30 p.m. New York City time. On each day of the exchange offer period prior to the Averaging Period, indicative exchange ratios for each day will be calculated based on the simple arithmetic average of the daily VWAPs of P&G common stock and Coty common stock on the NYSE on each day, calculated as though that day were the last day of the three day Averaging Period for this exchange offer. In other words, assuming that a given day is a trading day, the indicative exchange ratio will be calculated based on the simple arithmetic average of the daily VWAPs of P&G common stock and Coty common stock on the NYSE for that day and the immediately preceding two trading days. The indicative exchange ratio will also reflect whether the upper limit on the exchange ratio, described above, would have been in effect.

 

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During the Averaging Period, the indicative exchange ratios will be based on (1) on the first day of the Averaging Period, the daily VWAPs of P&G common stock and Coty common stock on the NYSE for that day, and (2) on the second day of the Averaging Period, the simple arithmetic average of the daily VWAPs of shares of P&G common stock and Coty common stock on the first and second day of the Averaging Period. No indicative exchange ratio will be published or announced on the third day of the Averaging Period.

Indicative exchange ratios will also be available by contacting the Information Agent at the telephone numbers provided on the back cover of this prospectus, on each day of the exchange offer prior to the announcement of the final exchange ratio.

The indicative exchange ratios, the final exchange ratio and the daily VWAPs used to calculate the final exchange ratio will each be rounded to four decimals.

Final Exchange Ratio

The final exchange ratio used to determine the number of shares of Galleria Company common stock, and effectively the number of shares of Coty common stock, that you will receive for each share of P&G common stock accepted for exchange in the exchange offer will be announced at www.dfking.com/pg and separately by press release no later than 9:00 a.m., New York City time, on the trading day immediately preceding the Expiration Date. P&G will also announce at that time whether the upper limit on the number of shares of Galleria Company common stock that can be received for each share of P&G common stock tendered is in effect. After that time, you may also contact the Information Agent to obtain this information at its telephone numbers provided on the back cover of this prospectus.

If a market disruption event occurs with respect to shares of P&G common stock or shares of Coty common stock on any day during the Averaging Period, both the Average P&G Stock Price and the Average Coty Stock Price will be determined using the daily VWAPs of shares of P&G common stock and shares of Coty common stock on the preceding trading day or days, as the case may be, on which no market disruption event occurred. If, however, P&G decides to extend the exchange offer period following a market disruption event, the Averaging Period will be reset. See “—Conditions for Completion of the Exchange Offer.”

Since the exchange offer is scheduled to expire at 12:00 midnight, New York City time, on the Expiration Date and the final exchange ratio will be announced by 9:00 a.m., New York City time, on the trading day immediately preceding the Expiration Date, you will have two trading days to tender or withdraw your shares of P&G common stock after the final exchange ratio is determined. For more information on tendering and withdrawing your shares, see “—Procedures for Tendering” and “—Withdrawal Rights.”

 

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For the purposes of illustration, the table below indicates the number of shares of Galleria Company common stock (and effectively shares of Coty common stock) that you would receive per share of P&G common stock accepted in the exchange offer, calculated on the basis described under “—Pricing Mechanism” and taking into account the upper limit, assuming a range of averages of the daily VWAPs of shares of P&G common stock and shares of Coty common stock during the Averaging Period. The first line of the table below shows the indicative Average P&G Stock Price, the indicative Average Coty Stock Price and the indicative exchange ratio that would have been in effect following the official close of trading on the NYSE on August 31, 2016, based on the daily VWAPs of shares of P&G common stock and shares of Coty common stock on August 29, 2016, August 30, 2016 and August 31, 2016. The table also shows the effects of an illustrative 10% increase or decrease in either or both the Average P&G Stock Price and Average Coty Stock Price based on changes relative to the values as of August 31, 2016.

 

P&G common stock

  

Coty common stock

   Average
P&G
Stock
Price
     Average
Coty
Stock
Price
     Shares of Galleria
Company
common stock to
be received per
share of P&G
common stock
tendered(1)
    Value
Ratio(2)
 

As of August 31, 2016

   As of August 31, 2016    $ 87.6708       $ 27.2853         3.4550        1.075   

Down 10%

   Up 10%    $ 78.9037       $ 30.0139         2.8268        1.075   

Down 10%

   Unchanged    $ 78.9037       $ 27.2853         3.1095        1.075   

Down 10%

   Down 10%    $ 78.9037       $ 24.5568         3.4550        1.075   

Unchanged

   Up 10%    $ 87.6708       $ 30.0139         3.1409        1.075   

Unchanged

   Down 10%    $ 87.6708       $ 24.5568         3.8388        1.075   

Up 10%

   Up 10%    $ 96.4378       $ 30.0139         3.4550        1.075   

Up 10%

   Unchanged    $ 96.4378       $ 27.2853         3.8005        1.075   

Up 10%

   Down 10%    $ 96.4378       $ 24.5568         3.9033 (3)      0.994   

 

(1) Reflects application of the indicative exchange ratio. Subject to receipt of cash in lieu of fractional shares of Coty common stock. See “The Exchange Offer—Fractional Shares.”
(2) The Value Ratio equals (a) the Average Coty Stock Price multiplied by the exchange ratio, divided by (b) the Average P&G Stock Price.
(3) In this scenario, the upper limit is in effect. Absent the upper limit, the exchange ratio would have been 4.2227 shares of Galleria Company common stock per share of P&G common stock tendered. In this scenario, P&G would announce that the upper limit on the number of shares that can be received for each share of P&G common stock tendered is in effect no later than 9:00 a.m., New York City time, on the trading day immediately preceding the Expiration Date.

During the twelve-month period of September 1, 2015 through August 31, 2016, the highest closing price for P&G common stock on the NYSE was $88.30 and the lowest closing price for Coty common stock on the NYSE was $21.79. If the Average P&G Stock Price and Average Coty Stock Price equaled these closing prices, you would receive only the limit of 3.9033 shares of Galleria Company common stock for each share of P&G common stock tendered, and the value of such shares of Galleria Company common stock, based on the Coty common stock price, would have been less than the value of shares of P&G common stock accepted for exchange (approximately $0.963 of shares of Galleria Company common stock for each $1.00 of shares of P&G common stock accepted for exchange).

If the trading price for P&G common stock were to increase during the last two trading days of the exchange offer period, the Average P&G Stock Price would likely be lower than the closing price for P&G common stock

 

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on the Expiration Date. As a result, you may receive fewer shares of Galleria Company common stock, and therefore effectively fewer shares of Coty common stock, for each $1.00 of shares of P&G common stock than you would have if the Average P&G Stock Price were calculated on the basis of the closing price for P&G common stock on the Expiration Date or on the basis of an Averaging Period that includes the last two trading days of the exchange offer period. Similarly, if the trading price for Coty common stock were to decrease during the last two trading days of the exchange offer period, the Average Coty Stock Price would likely be higher than the closing price for Coty common stock on the Expiration Date. This could also result in your receiving fewer shares of Galleria Company common stock, and therefore effectively fewer shares of Coty common stock, for each $1.00 of shares of P&G common stock than you would otherwise receive if the Average Coty Stock Price were calculated on the basis of the closing price for Coty common stock on the Expiration Date or on the basis of an Averaging Period that includes the last two trading days of the exchange offer period.

The number of shares of P&G common stock that may be accepted in the exchange offer may be subject to proration. Depending on the number of shares of P&G common stock validly tendered in the exchange offer, and not properly withdrawn, and the final exchange ratio, determined as described above, P&G may have to limit the number of shares of P&G common stock that it accepts in the exchange offer through a proration process. Any proration of the number of shares accepted in the exchange offer will be determined on the basis of the proration mechanics described below under “—Proration; Tenders for Exchange by Holders of Fewer than 100 shares of P&G Common Stock.”

This prospectus and the related documents are being sent to:

 

    persons who directly held shares of P&G common stock on August 26, 2016. On that date, there were 2,669,885,531 shares of P&G common stock outstanding, which were held of record by approximately 268,153 shareholders; and

 

    brokers, banks and similar persons whose names or the names of whose nominees appear on P&G’s shareholder list or, if applicable, who are listed as participants in a clearing agency’s security position listing for subsequent transmittal to beneficial owners of shares of P&G common stock.

Proration; Tenders for Exchange by Holders of Fewer than 100 Shares of P&G Common Stock

If, upon the expiration of the exchange offer, P&G shareholders have validly tendered more shares of P&G common stock than P&G is offering to accept for exchange (taking into account the exchange ratio and the total number of shares of Galleria Company common stock owned by P&G), P&G will limit the number of shares of P&G common stock that it accepts for exchange in the exchange offer through a proration process. Proration for each tendering P&G shareholder will be based on (1) the proportion that the total number of shares of P&G common stock to be accepted for exchange bears to the total number of shares of P&G common stock validly tendered and not properly withdrawn and (2) the number of shares of P&G common stock validly tendered and not properly withdrawn by that shareholder (rounded to the nearest whole number of shares of P&G common stock and subject to any adjustment necessary to ensure the exchange of all shares of Galleria Company common stock owned by P&G), except for tenders of odd-lots, as described below.

Except as otherwise provided in this section, beneficial holders (other than plan participants in a P&G U.S. benefit plan) of fewer than 100 shares of P&G common stock who validly tender all of their shares will not be subject to proration if the exchange offer is oversubscribed. Beneficial holders of more than 100 shares of P&G common stock are not eligible for this preference.

Any beneficial holder (other than plan participants in a P&G U.S. benefit plan) of fewer than 100 shares of P&G common stock who wishes to tender all of the shares must complete the box entitled “Odd-Lot Shares” on the letter of transmittal. If your odd-lot shares are held by a broker for your account, you can contact your broker and request the preferential treatment. If you hold odd-lot shares as a participant in a P&G U.S. benefit plan, you are not entitled to this preferential treatment.

 

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P&G will announce the preliminary proration factor at www.dfking.com/pg and separately by press release as promptly as practicable after the Expiration Date. At the expiration of the guaranteed delivery period (three NYSE trading days following the Expiration Date), P&G will confirm the final results of the exchange offer, including the final proration factor, with the Exchange Agent. As promptly as practicable after the final results are confirmed, P&G will announce the final results of the exchange offer, including the final proration factor, at www.dfking.com/pg and separately by press release.

Any shares of P&G common stock not accepted for exchange in the exchange offer as a result of proration will be returned to the tendering shareholder promptly after the final proration factor is determined in book-entry form through either the DRS or the DSPP.

For purposes of the exchange offer, a “business day” means any day other than a Saturday, Sunday or U.S. federal holiday and consists of the time period from 12:01 a.m. through 12:00 midnight, New York City time.

Fractional Shares

Fractional shares of Galleria Company common stock will be issued in the Distribution. The shares of Galleria Company common stock (including the fractional shares) will be held by the Exchange Agent for the benefit of P&G shareholders whose shares of P&G common stock are being accepted for exchange in the exchange offer and, in the case of a subsequent pro rata dividend, P&G shareholders whose shares of P&G common stock are outstanding after completion of the exchange offer. Upon consummation of the Merger, each share of Galleria Company common stock issued in the Distribution will automatically convert into the right to receive one share of Coty common stock. No fractional shares of Coty common stock will be issued in the Merger to holders of fractional shares of Galleria Company common stock. In lieu of any fractional shares of Coty common stock, holders of fractional shares of Galleria Company common stock who would otherwise be entitled to receive such fractional shares of Coty common stock will be entitled to an amount in cash, without interest, equal to the holder’s pro rata portion of the net proceeds of the sale of fractional shares in the open market, which will occur no later than 20 business days after the completion of the Transactions, obtained by aggregating the fractional shares of Coty common stock otherwise allocable to the holders of fractional shares of Galleria Company common stock. The distribution of cash in lieu of fractional shares will occur separate from, and subsequent to, the distribution of shares of Coty common stock.

Exchange of Shares of P&G Common Stock

Upon the terms and subject to the conditions of the exchange offer (including, if the exchange offer is extended or amended, the terms and conditions of the extension or amendment), P&G will accept for exchange, and will exchange, for shares of Galleria Company common stock owned by P&G, the shares of P&G common stock validly tendered, and not properly withdrawn, prior to the expiration of the exchange offer, promptly after the Expiration Date.

The exchange of shares of P&G common stock tendered and accepted for exchange pursuant to the exchange offer will be made only after timely receipt by the Exchange Agent of (1)(a) certificates representing all physically tendered shares of P&G common stock or (b) in the case of shares delivered by book-entry transfer through The Depository Trust Company, confirmation of a book-entry transfer of those shares of P&G common stock in the Exchange Agent’s account at The Depository Trust Company, in each case pursuant to the procedures set forth in the section below entitled “—Procedures for Tendering,” (2) the letter of transmittal for shares of P&G common stock, properly completed and duly executed, with any required signature guarantees, or, in the case of a book-entry transfer through The Depository Trust Company, an agent’s message and (3) any other required documents.

The exchange offer will be completed when P&G has accepted shares of P&G common stock for exchange. P&G will be deemed to have accepted for exchange, and thereby exchanged, shares of P&G common stock

 

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validly tendered and not properly withdrawn if and when P&G notifies the Exchange Agent of its acceptance of the tenders of those shares of P&G common stock pursuant to the exchange offer.

At or prior to the completion of the exchange offer, P&G will deliver to the Exchange Agent all of the shares of Galleria Company common stock outstanding, with irrevocable instructions to hold the shares of Galleria Company common stock for the benefit of P&G shareholders whose shares of P&G common stock have been accepted for exchange in the exchange offer and, in the case of any subsequent pro rata dividend, P&G shareholders whose shares of P&G common stock remain outstanding after completion of the exchange offer. Pursuant to the Merger, each share of Galleria Company common stock issued to P&G shareholders in the Distribution will automatically convert into the right to receive one share of Coty common stock. Upon the completion of the exchange offer, Coty will deposit with its transfer agent book-entry authorizations representing shares of Coty common stock, with irrevocable instructions to hold the shares of Coty common stock for the benefit of the holders of shares of Galleria Company common stock. Shares of Coty common stock and cash in lieu of fractional shares will be transferred to the holders of shares of Galleria Company common stock as promptly as practicable after the Merger and P&G’s notice and determination of the final proration factor. You will not receive any interest on any cash paid to you, even if there is a delay in making the payment.

If P&G does not accept for exchange any tendered shares of P&G common stock for any reason pursuant to the terms and conditions of the exchange offer, the Exchange Agent (1) in the case of shares of P&G common stock held in certificated form, will convert such certificates representing such shares into shares in book-entry form held through the DRS; (2) in the case of shares held in book-entry form through the DRS or the DSPP, will return such shares in book-entry form either through the DRS or the DSPP, depending on where such shares were held prior to the tender, without expense to the tendering shareholder; and (3) in the case of shares held in book-entry form through The Depository Trust Company, will credit such shares to an account maintained within The Depository Trust Company, in each case promptly following expiration or termination of the exchange offer.

Procedures for Tendering

Shares Held in Certificated Form or in Book-Entry Form through the DRS or the DSPP

If you hold certificates representing shares of P&G common stock or if you hold your shares of P&G common stock in book-entry form through the DRS or the DSPP, to validly tender such shares pursuant to the exchange offer, you must deliver to the Exchange Agent a letter of transmittal, properly completed and duly executed, along with any required signature guarantees and any other required documents. If you hold your shares of P&G common stock in certificated form, you must also deliver to the Exchange Agent the certificates representing the shares of P&G common stock tendered. All certificates received by the Exchange Agent will be deposited into the DRS. The Exchange Agent’s address is listed on the last page of the letter of transmittal. Since certificates are not issued for DRS or DSPP shares, you do not need to deliver any certificates representing those shares to the Exchange Agent.

Shares Held Through a Broker, Dealer, Commercial Bank, Trust Company or Similar Institution

If you hold shares of P&G common stock through a broker, dealer, commercial bank, trust company or similar institution, you should follow the instructions sent to you separately by that institution. In this case, you should not use a letter of transmittal to direct the tender of your shares of P&G common stock. If that institution holds shares of P&G common stock through The Depository Trust Company, it must notify The Depository Trust Company and cause it to transfer the shares into the Exchange Agent’s account in accordance with The Depository Trust Company’s procedures. The institution must also ensure that the Exchange Agent receives an agent’s message from The Depository Trust Company confirming the book-entry transfer of your shares of P&G

 

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common stock. A tender by book-entry transfer will be completed upon receipt by the Exchange Agent of an agent’s message, book-entry confirmation from The Depository Trust Company and any other required documents.

The term “agent’s message” means a message, transmitted by The Depository Trust Company to, and received by, the Exchange Agent and forming a part of a book-entry confirmation, which states that The Depository Trust Company has received an express acknowledgment from the participant in The Depository Trust Company tendering the shares of P&G common stock which are the subject of the book-entry confirmation, that the participant has received and agrees to be bound by the terms of the letter of transmittal (including the instructions thereto) and that P&G may enforce that agreement against the participant.

The Exchange Agent will establish an account with respect to the shares of P&G common stock at The Depository Trust Company for purposes of the exchange offer, and any eligible institution that is a participant in The Depository Trust Company may make book-entry delivery of shares of P&G common stock by causing The Depository Trust Company to transfer such shares into the Exchange Agent’s account at The Depository Trust Company in accordance with The Depository Trust Company’s procedure for the transfer. Delivery of documents to The Depository Trust Company does not constitute delivery to the Exchange Agent.

Shares Held Through a P&G U.S. Benefit Plan

If you hold your shares through a P&G U.S. benefit plan, you do not need to take any immediate action with respect to the exchange offer. A fiduciary appointed under each of those plans will determine whether (i) to permit beneficial owners to elect to tender shares of P&G common stock for exchange or (ii) alternatively, to exchange shares of P&G common stock held in each plan for the benefit of employees and former employees of P&G and their beneficiaries. P&G has been informed by each of the fiduciaries of the P&G U.S. benefit plans that beneficial owners will not be permitted to elect to tender shares held in those plans and that the fiduciaries do not expect to elect to tender shares held for the benefit of employees, former employees and their beneficiaries in the exchange offer. You should contact the appropriate fiduciary for your respective benefit plan if you have questions about your plan’s participation in the exchange offer.

General Instructions

Do not send letters of transmittal and certificates representing shares of P&G common stock to P&G, Galleria Company, Coty or the Information Agent. Letters of transmittal for shares of P&G common stock and certificates representing shares of P&G common stock should be sent to the Exchange Agent at an address listed on the letter of transmittal. Trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity who sign a letter of transmittal or any certificates or stock powers must indicate the capacity in which they are signing and must submit evidence of their power to act in that capacity unless waived by P&G.

Whether you tender your shares of P&G common stock by delivery of certificates or through your broker, the Exchange Agent must receive an original signed letter of transmittal for shares of P&G common stock and the certificates representing your shares of P&G common stock at the address set forth on the back cover of this prospectus prior to the expiration of the exchange offer. Alternatively, in case of a book-entry transfer of shares of P&G common stock through The Depository Trust Company, the Exchange Agent must receive the agent’s message and a book-entry confirmation.

Letters of transmittal for shares of P&G common stock and certificates representing shares of P&G common stock must be received by the Exchange Agent. Please read carefully the instructions to the letter of transmittal you have been sent. You should contact the Information Agent if you have any questions regarding tendering your shares of P&G common stock.

 

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Signature Guarantees

Signatures on all letters of transmittal for shares of P&G common stock must be guaranteed by a firm which is a member of the Securities Transfer Agents Medallion Program, or by any other “eligible guarantor institution,” as such term is defined in Rule 17Ad-15 under the Exchange Act (each of the foregoing being a “U.S. eligible institution”), except in cases in which shares of P&G common stock are tendered either (1) by a registered shareholder who has not completed the section entitled “Special Issuance Instructions” on the letter of transmittal or (2) for the account of a U.S. eligible institution.

If the certificates representing shares of P&G common stock are registered in the name of a person other than the person who signs the letter of transmittal, the certificates must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name or names of the registered owner or owners appear on the certificates, with the signature(s) on the certificates or stock powers guaranteed by an eligible institution.

Guaranteed Delivery Procedures

If you wish to tender shares of P&G common stock pursuant to the exchange offer but (1) your certificates are not immediately available; (2) you cannot deliver the shares or other required documents to the Exchange Agent on or before the Expiration Date; or (3) you cannot comply with the procedures for book-entry transfer through The Depository Trust Company on a timely basis, you may still tender your shares of P&G common stock, so long as all of the following conditions are satisfied:

 

    you must make your tender by or through a U.S. eligible institution;

 

    on or before the Expiration Date, the Exchange Agent must receive a properly completed and duly executed notice of guaranteed delivery, substantially in the form made available by P&G, in the manner provided below; and

 

    within three NYSE trading days after the date of execution of such notice of guaranteed delivery, the Exchange Agent must receive (1)(a) certificates representing all physically tendered shares of P&G common stock or (b) in the case of shares delivered by book-entry transfer through The Depository Trust Company, confirmation of a book-entry transfer of those shares of P&G common stock in the Exchange Agent’s account at The Depository Trust Company; (2) a letter of transmittal for shares of P&G common stock properly completed and duly executed (including any signature guarantees that may be required) or, in the case of shares delivered by book-entry transfer through The Depository Trust Company, an agent’s message; and (3) any other required documents.

Registered shareholders (including any participant in The Depository Trust Company whose name appears on a security position listing of The Depository Trust Company as the owner of shares of P&G common stock) may transmit the notice of guaranteed delivery by facsimile transmission or mail it to the Exchange Agent. If you hold shares of P&G common stock through a broker, dealer, commercial bank, trust company or similar institution, that institution must submit any notice of guaranteed delivery on your behalf.

Effect of Tenders

A tender of shares of P&G common stock pursuant to any of the procedures described above will constitute your acceptance of the terms and conditions of the exchange offer as well as your representation and warranty to P&G that (1) you have the full power and authority to tender, sell, assign and transfer the tendered shares (and any and all other shares of P&G common stock or other securities issued or issuable in respect of such shares); (2) when the same are accepted for exchange, P&G will acquire good and unencumbered title to such shares, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claims; and (3) you own the shares being tendered within the meaning of Rule 14e-4 promulgated under the Exchange Act.

 

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It is a violation of Rule 14e-4 under the Exchange Act for a person, directly or indirectly, to tender shares of P&G common stock for such person’s own account unless, at the time of tender, the person so tendering (1) has a net long position equal to or greater than the amount of (a) shares of P&G common stock tendered or (b) other securities immediately convertible into or exchangeable or exercisable for the shares of P&G common stock tendered and such person will acquire such shares for tender by conversion, exchange or exercise; and (2) will cause such shares to be delivered in accordance with the terms of this prospectus. Rule 14e-4 provides a similar restriction applicable to the tender of guarantee of a tender on behalf of another person.

The exchange of shares of P&G common stock tendered and accepted for exchange pursuant to the exchange offer will be made only after timely receipt by the Exchange Agent of (1)(a) certificates representing all physically tendered shares of P&G common stock or (b) in the case of shares delivered by book-entry transfer through The Depository Trust Company, confirmation of a book-entry transfer of those shares of P&G common stock in the Exchange Agent’s account at The Depository Trust Company; (2) the letter of transmittal for P&G common stock, properly completed and duly executed, with any required signature guarantees, or, in the case of a book-entry transfer through The Depository Trust Company, an agent’s message; and (3) any other required documents.

Appointment of Attorneys-in-Fact and Proxies

By executing a letter of transmittal as set forth above, you irrevocably appoint P&G’s designees as your attorneys-in-fact and proxies, each with full power of substitution, to the full extent of your rights with respect to your shares of P&G common stock tendered and accepted for exchange by P&G and with respect to any and all other shares of P&G common stock and other securities issued or issuable in respect of the shares of P&G common stock on or after the expiration of the exchange offer. That appointment is effective when and only to the extent that P&G deposits the shares of Galleria Company common stock for the shares of P&G common stock that you have tendered with the Exchange Agent. All such proxies shall be considered coupled with an interest in the tendered shares of P&G common stock and therefore shall not be revocable. Upon the effectiveness of such appointment, all prior proxies that you have given will be revoked and you may not give any subsequent proxies (and, if given, they will not be deemed effective). P&G’s designees will, with respect to the shares of P&G common stock for which the appointment is effective, be empowered, among other things, to exercise all of your voting and other rights as they, in their sole discretion, deem proper. P&G reserves the right to require that, in order for shares of P&G common stock to be deemed validly tendered, immediately upon P&G’s acceptance for exchange of those shares of P&G common stock, P&G must be able to exercise full voting rights with respect to such shares.

Determination of Validity

P&G will determine questions as to the validity, form, eligibility (including time of receipt) and acceptance for exchange of any tender of shares of P&G common stock, in P&G’s sole discretion. P&G reserves the absolute right to reject any and all tenders of shares of P&G common stock that it determines are not in proper form or the acceptance of or exchange for which may, in the opinion of its counsel, be unlawful. P&G also reserves the absolute right to waive any of the conditions of the exchange offer, or any defect or irregularity in the tender of any shares of P&G common stock. No tender of shares of P&G common stock is valid until all defects and irregularities in tenders of shares of P&G common stock have been cured or waived. None of P&G, the Exchange Agent, the Information Agent or any other person is under any duty to give notification of any defects or irregularities in the tender of any shares of P&G common stock or will incur any liability for failure to give any such notification. P&G’s interpretation of the terms and conditions of the exchange offer (including the letter of transmittal and instructions thereto) will be final and binding.

Notwithstanding anything herein to the contrary, P&G shareholders may challenge a determination made by P&G in a court of competent jurisdiction and a final, non-appealable order or judgment of a court of competent jurisdiction will be final and binding on all parties.

 

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Binding Agreement

The tender of shares of P&G common stock pursuant to any of the procedures described above will constitute a binding agreement between P&G and you upon the terms of and subject to the conditions to the exchange offer.

The method of delivery of share certificates of shares of P&G common stock and all other required documents, including delivery through The Depository Trust Company, is at your option and risk, and the delivery will be deemed made only when actually received by the Exchange Agent. If delivery is by mail, it is recommended that you use registered mail with return receipt requested, properly insured. In all cases, you should allow sufficient time to ensure timely delivery.

Partial Tenders

If you tender fewer than all the shares of P&G common stock evidenced by any share certificate you deliver to the Exchange Agent, then you will need to fill in the number of shares that you are tendering in the box entitled “Total Shares of Common Stock Tendered” under the heading “Description of Tendered Shares” in the table on the second page of the letter of transmittal filed as an exhibit to the registration statement of which this prospectus forms a part. In those cases, as soon as practicable after the Expiration Date, the Exchange Agent will credit the remainder of the common stock that were evidenced by the certificate(s) but not tendered to a DRS account in the name of the registered holder maintained by P&G’s transfer agent, unless otherwise provided in “Special Delivery Instructions” in the letter of transmittal filed as an exhibit to the registration statement of which this prospectus forms a part. Unless you indicate otherwise in your letter of transmittal, all of the common stock represented by share certificates you deliver to the Exchange Agent will be deemed to have been tendered. No share certificates are expected to be delivered to you, including in respect of any shares delivered to the Exchange Agent that were previously in certificated form.

Lost or Destroyed Certificates

If your certificate(s) representing shares of P&G common stock have been mutilated, destroyed, lost or stolen and you wish to tender your shares, please contact P&G Shareholder Services at 1-800-742-6253 regarding the requirements for replacement of the certificate(s). Replacement shares will be issued in book-entry form through the DRS. You may be asked to post a surety bond for your lost shares of P&G common stock. Your shares of P&G common stock will not be included in the exchange offer unless you satisfy the requirements for replacement for your lost or destroyed certificate(s). You are urged to call P&G Shareholder Services immediately to ensure timely processing of the documentation.

Withdrawal Rights

Shares of P&G common stock tendered pursuant to the exchange offer may be withdrawn at any time prior to 12:00 midnight, New York City time, on the Expiration Date and, unless P&G has previously accepted them pursuant to the exchange offer, may also be withdrawn at any time after October 28, 2016, which is 40 business days from the commencement of the exchange offer. Once P&G accepts shares of P&G common stock pursuant to the exchange offer, your tender is irrevocable.

For a withdrawal of shares of P&G common stock to be effective, the Exchange Agent must receive from you a written notice of withdrawal or facsimile transmission of notice of withdrawal at one of its addresses set forth on the back cover of this prospectus and your notice must include your name and the number of shares of P&G common stock to be withdrawn, as well as the name of the registered holder, if it is different from that of the person who tendered those shares.

If certificates have been delivered or otherwise identified to the Exchange Agent and such shares are withdrawn from the exchange offer, they will be returned to you in book-entry form, through the DRS. If shares of P&G common stock have been tendered pursuant to the procedures for book-entry tender through The

 

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Depository Trust Company discussed in the section entitled “—Procedures for Tendering,” any notice of withdrawal must specify the name and number of the account at The Depository Trust Company to be credited with the withdrawn shares and must otherwise comply with the procedures of The Depository Trust Company.

P&G will decide all questions as to the form and validity (including time of receipt) of any notice of withdrawal, in its sole discretion, and its decision shall be final and binding. None of P&G, the Exchange Agent, the Information Agent nor any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal or will incur any liability for failure to give any notification.

Notwithstanding anything herein to the contrary, P&G shareholders may challenge a determination made by P&G in a court of competent jurisdiction and a final, non-appealable order or judgment of a court of competent jurisdiction will be final and binding on all parties.

Any shares of P&G common stock properly withdrawn will be deemed not to have been validly tendered for purposes of the exchange offer. However, you may re-tender withdrawn shares of P&G common stock by following one of the procedures discussed in the section entitled “—Procedures for Tendering” at any time prior to the expiration of the exchange offer (or pursuant to the instructions sent to you separately).

Except for the withdrawal rights described above, any tender made under the exchange offer is irrevocable.

Book-Entry Accounts

Certificates representing shares of Galleria Company common stock will not be issued to holders of shares of P&G common stock pursuant to the exchange offer. Rather than issuing certificates representing such shares of Galleria Company common stock to tendering holders of shares of P&G common stock, the Exchange Agent will cause such shares of Galleria Company common stock to be credited to records maintained by the Exchange Agent for the benefit of the respective holders. As promptly as practicable following the completion of the Distribution, Merger Sub will merge with and into Galleria Company, with Galleria Company surviving the Merger and becoming a wholly owned subsidiary of Coty, and each share of Galleria Company common stock will be converted into a share of Coty common stock or cash in lieu of fractional shares. As promptly as practicable following the Merger and P&G’s notice and determination of the final proration factor, if any, Coty’s transfer agent will credit the shares of Coty common stock, into which the shares of Galleria Company common stock have been converted, to book-entry accounts maintained for the benefit of the P&G shareholders who received shares of Galleria Company common stock in the exchange offer or as a subsequent pro rata dividend, if any, and will send these holders a statement evidencing their holdings of shares of Coty common stock.

Extension; Termination; Amendment

Extension; Termination or Amendment by P&G

P&G expressly reserves the right at any time and from time to time to extend the period of time during which the exchange offer is open and thereby delay acceptance for payment of, and the payment for, any shares of P&G common stock validly tendered and not properly withdrawn in the exchange offer. For example, the exchange offer can be extended if any of the conditions for completion of the exchange offer described in the next section entitled “—Conditions for Completion of the Exchange Offer” are not satisfied or waived prior to the expiration of the exchange offer. While a determination to extend the exchange offer is in P&G’s discretion, P&G has agreed with Coty that it will extend the exchange offer in specified circumstances. See “The Transaction Agreement—Distribution.”

 

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P&G expressly reserves the right, in its sole discretion, to amend the terms of the exchange offer in any respect prior to the expiration of the exchange offer, except that P&G does not intend to extend the exchange offer other than in the circumstances described above.

If P&G materially changes the terms of or information concerning the exchange offer, it will extend the exchange offer if required by law. The SEC has stated that, as a general rule, it believes that an offer should remain open for a minimum of five business days from the date that notice of the material change is first given. The length of time will depend on the particular facts and circumstances.

As required by law, the exchange offer will be extended so that it remains open for a minimum of ten business days following the announcement if:

 

    P&G changes the method for calculating the number of shares of Galleria Company common stock offered in exchange for each share of P&G common stock; and

 

    the exchange offer is scheduled to expire within ten business days of announcing any such change.

If P&G extends the exchange offer, is delayed in accepting for exchange any shares of P&G common stock or is unable to accept for exchange any shares of P&G common stock under the exchange offer for any reason, then, without affecting P&G’s rights under the exchange offer, the Exchange Agent may retain all shares of P&G common stock tendered on P&G’s behalf. These shares of P&G common stock may not be withdrawn except as provided in the section entitled “—Withdrawal Rights.”

P&G’s reservation of the right to delay acceptance of any shares of P&G common stock is subject to applicable law, which requires that P&G pay the consideration offered or return the shares of P&G common stock deposited promptly after the termination or withdrawal of the exchange offer.

P&G will issue a press release or other public announcement no later than 9:00 a.m., New York City time, on the next business day following any extension, amendment, non-acceptance or termination of the previously scheduled Expiration Date.

Method of Public Announcement

Subject to applicable law (including Rules 13e-4(d), 13e-4(e)(3) and 14e-1 under the Exchange Act, which require that any material change in the information published, sent or given to shareholders in connection with the exchange offer be promptly disclosed to shareholders in a manner reasonably designed to inform them of the change) and without limiting the manner in which P&G may choose to make any public announcement, P&G assumes no obligation to publish, advertise or otherwise communicate any such public announcement other than by making a release to the Dow Jones News Service or the Public Relations Newswire.

Conditions for Completion of the Exchange Offer

P&G will not be required to complete the exchange offer, and may extend or terminate the exchange offer, if at the scheduled Expiration Date:

 

    the number of shares of Galleria Company common stock that would be distributed in exchange for shares of P&G common stock validly tendered in the exchange offer and not properly withdrawn exceeds a specified percentage, currently expected to be approximately 86.1%, to be calculated based on the relative prices per share of Coty common stock and P&G common stock and the relative numbers of shares of Coty common stock and P&G common stock outstanding as of the Expiration Date, provided that, at any time prior to the Expiration Date, P&G in its reasonable judgment and after consultation with Coty may determine the Revised Minimum Condition by reapplying the agreed-upon formula used to calculate the Minimum Condition using updated information reflecting the then-current data or otherwise increasing the Minimum Condition by the minimum amount necessary, in each case, to ensure that the agreed-upon minimum amount of P&G common stock is tendered;

 

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    the Galleria Company registration statement on Form S-4/S-l or the Coty registration statement on Form S-4 shall not have become effective under the Securities Act or any stop order suspending the effectiveness of any such registration statement shall have been issued and be in effect;

 

    Coty’s information statement on Schedule 14C shall not have been mailed to Coty stockholders in accordance with the Transaction Agreement at least 20 days prior to the closing date or the issuance of Coty common stock in connection with the Merger and the amendment to Coty’s certificate of incorporation is not permitted by Regulation 14C of the Exchange Act (including Rule 14c-2 promulgated under the Exchange Act) or the requirements of the NYSE;

 

    the shares of Coty common stock to be issued in the Merger shall not have been authorized for listing on the NYSE;

 

    P&G has not received a written opinion, dated as of the closing date of the Distribution, from Cadwalader, Wickersham & Taft LLP, its special tax counsel, to the effect that the (i) Merger will be treated for federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Code; (ii) Galleria Transfer, taken together with the Distribution, should qualify as a tax-free reorganization pursuant to section 368(a)(1)(D) of the Code, (iii) Distribution, as such, should qualify as a distribution to P&G shareholders pursuant to section 355 of the Code and (iv) the Merger should not cause section 355(e) of the Code to apply to the Distribution;

 

    any condition precedent to the completion of the Transactions (other than the exchange offer) pursuant to the Transaction Agreement shall not have been fulfilled or waived (except for the conditions precedent that will be fulfilled at the time of the completion of the Transactions) or for any reason the Transactions (other than the exchange offer) cannot be consummated promptly after completion of the exchange offer (see “The Transaction Agreement—Conditions to the Transactions”);

 

    either P&G or Coty shall have given notice of termination of the Transaction Agreement; or

 

    any of the following conditions or events has occurred, or P&G shall have reasonably determined that any of the following conditions or events is reasonably likely to occur:

 

    any injunction, order, stay, judgment or decree is issued by any court, government, governmental authority or other regulatory or administrative authority having jurisdiction over P&G, Galleria Company or Coty and is in effect, or any law, statute, rule, regulation, legislation, interpretation, governmental order or injunction shall have been enacted or enforced, any of which would reasonably be likely to restrain or prohibit completion of the exchange offer;

 

    any proceeding for the purpose of suspending the effectiveness of the registration statements has been initiated by the SEC and not concluded or withdrawn;

 

    a “Galleria Business MAE,” as such term is defined in the Transaction Agreement;

 

    any general suspension of trading in, or limitation on prices for, securities on any national securities exchange or in the over-the-counter market in the United States;

 

    any extraordinary or material adverse change in U.S. financial markets generally, including, without limitation, a decline of at least 15% in either the Dow Jones Average of Industrial Stocks or the Standard & Poor’s 500 Index within a period of 60 consecutive days or less occurring after August 31, 2016;

 

    a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States;

 

    a commencement of a war (whether declared or undeclared), armed hostilities or other national or international calamity or act of terrorism, directly or indirectly involving the United States, which would reasonably be expected to affect materially and adversely, or to delay materially, the completion of the exchange offer;

 

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    if any of the situations above exists as of the commencement of the exchange offer, any material deterioration of the situation;

 

    any action, litigation, suit, claim or proceeding is instituted that would be reasonably likely to enjoin, prohibit, restrain or make illegal completion of the exchange offer; or

 

    a market disruption event occurs with respect to shares of P&G common stock or shares of Coty common stock on any date in the exchange offer period and such market disruption event has impaired the benefits of the exchange offer to P&G.

If the upper limit described above is in effect at the expiration of the exchange offer and the Minimum Condition or Revised Minimum Condition is not satisfied or waived as a result of a low number of tenders by P&G shareholders, the Minimum Condition or Revised Minimum Condition would allow P&G to not consummate the exchange offer, thereby preventing the exchange of shares of P&G common stock by tendering holders who may not have recognized or acted upon the underlying change in the economic benefits of the exchange offer resulting from the upper limit being in effect. If the Minimum Condition or Revised Minimum Condition is not satisfied due to a low subscription rate in the exchange offer and is not otherwise waived by P&G, P&G may instead proceed with a spin-off distribution of all of the outstanding shares of Galleria Company common stock pro rata to the holders of P&G common stock, provided that the conditions to the consummation of such transaction set forth in the Transaction Agreement are satisfied.

Each of the foregoing conditions to the completion of the exchange offer is independent of any other condition; the exclusion of any event from a particular condition above does not mean that such event may not be included in another condition.

For a summary of what constitutes a “Galleria Business MAE,” see the description of the definition of the term “material adverse effect” when used with respect to P&G Beauty Brands beginning on page 204 of this prospectus. Such summary is qualified in its entirety by the Transaction Agreement.

If any of the above events occurs, P&G may:

 

    terminate the exchange offer and promptly return all tendered shares of P&G common stock to tendering shareholders;

 

    extend the exchange offer and, subject to the withdrawal rights described in the section entitled “—Withdrawal Rights,” retain all tendered shares of P&G common stock until the extended exchange offer expires;

 

    amend the terms of the exchange offer; or

 

    waive the unsatisfied condition (except the conditions relating to the absence of an injunction and the effectiveness of the registration statement for the shares of Galleria Company common stock to be distributed in the exchange offer) and, subject to any requirement to extend the period of time during which the exchange offer is open, complete the exchange offer.

If the Revised Minimum Condition applies, depending on the number of days remaining in the exchange offer, SEC regulations may require that the exchange offer be extended and additional disclosure be circulated to P&G shareholders.

These conditions are for the sole benefit of P&G. P&G may assert these conditions with respect to all or any portion of the exchange offer regardless of the circumstances giving rise to them, other than circumstances arising from P&G’s action or inaction. P&G expressly reserves the right, in its sole discretion, to waive any condition in whole or in part at any time. P&G’s failure to exercise its rights under any of the above conditions does not represent a waiver of these rights. Each right is an ongoing right which may be asserted at any time. However, all conditions for completion of the exchange offer must be satisfied or waived by P&G prior to the

 

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expiration of the exchange offer. If the exchange offer is not consummated, P&G will distribute all of its shares of Galleria Company common stock as a “spin-off” to P&G shareholders, provided that the conditions to the consummation of such transaction set forth in the Transaction Agreement are satisfied.

Legal and Other Limitations; Certain Matters Relating to Non-U.S. Jurisdictions

Legal and Other Limitations

This prospectus is not an offer to sell or exchange and it is not a solicitation of an offer to buy any shares of Galleria Company common stock or shares of Coty common stock in any jurisdiction in which the offer, sale or exchange is not permitted.

Certain Matters Relating to Non-U.S. Jurisdictions

This prospectus is not an offer to buy, sell or exchange and it is not a solicitation of an offer to buy or sell any shares of P&G common stock, Galleria Company common stock or Coty common stock in any jurisdiction in which such offer, sale or exchange is not permitted. Countries outside the United States generally have their own legal requirements that govern securities offerings made to persons resident in those countries and often impose stringent requirements about the form and content of offers made to the general public. None of P&G, Galleria Company or Coty has taken any action under those non-U.S. regulations to facilitate a public offer to exchange the shares of Galleria Company common stock or Coty common stock outside the United States. Accordingly, the ability of any non-U.S. person to tender shares of P&G common stock in the exchange offer will depend on whether there is an exemption available under the laws of such person’s home country that would permit the person to participate in the exchange offer without the need for P&G to take any action to facilitate a public offering in that country or otherwise. For example, some countries exempt transactions from the rules governing public offerings if they involve persons who meet certain eligibility requirements relating to their status as sophisticated or professional investors.

Non-U.S. shareholders should consult their advisors in considering whether they may participate in the exchange offer in accordance with the laws of their home countries and, if they do participate, whether there are any restrictions or limitations on transactions in the shares of Galleria Company common stock that may apply in their home countries. P&G, Galleria Company and Coty cannot provide any assurance about whether such limitations may exist.

P&G believes a substantial majority of its shareholders are U.S. investors and does not expect the legal limitations described under this heading to cause the exchange offer to be undersubscribed.

Fees and Expenses

P&G has retained D.F. King & Co., Inc. to act as the Information Agent and Wells Fargo Bank, N.A., to act as the Exchange Agent in connection with the exchange offer.

The Information Agent and the Exchange Agent each will receive reasonable compensation for their respective services, will be reimbursed for reasonable out-of-pocket expenses and will be indemnified against specified liabilities in connection with their services.

Dividend and Distribution of Any Shares of Galleria Company Common Stock Remaining after Completion of the Exchange Offer

If the exchange offer is completed but is not fully subscribed, P&G will distribute all of the Remaining Shares in a subsequent pro rata dividend to the Remaining P&G Shareholders. Any P&G shareholder who validly tenders (and does not properly withdraw) shares of P&G common stock for shares of Galleria Company common

 

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stock in the exchange offer will waive its rights with respect to those tendered shares of P&G common stock to receive, and forfeit any rights to, any Remaining Shares distributed on a pro rata basis to the Remaining P&G Shareholders in the event the exchange offer is not fully subscribed.

At or prior to the completion of the exchange offer, P&G will deliver all of the shares of Galleria Company common stock owned by P&G to the Exchange Agent with irrevocable instructions to hold the shares of Galleria Company common stock for the benefit of P&G shareholders whose shares of P&G common stock have been accepted for exchange in the exchange offer and, in the case of any subsequent pro rata dividend, the Remaining P&G Shareholders. If there is a subsequent pro rata dividend to be distributed, the Exchange Agent will calculate the exact number of Remaining Shares to be distributed as a pro rata dividend to the Remaining P&G Shareholders, and P&G will distribute the Remaining Shares immediately thereafter.

Material U.S. Federal Income Tax Consequences of the Distribution, the Merger and Related Transactions

The following discussion summarizes the material U.S. federal income tax consequences of the Galleria Transfer, the Distribution, the Merger and related transactions to P&G and certain beneficial owners of P&G common stock that hold their P&G common stock as a capital asset for tax purposes. This discussion is based on the Code, the Treasury regulations promulgated thereunder, judicial opinions, published positions of the IRS, and all other applicable authorities as of the date of this prospectus, all of which are subject to change, possibly with retroactive effect, and assumes that the Galleria Transfer, the Distribution, the Merger and related transactions will be consummated in accordance with the Transaction Agreement and as further described in this prospectus.

For purposes of this summary, a “U.S. holder” means any beneficial owner of P&G common stock that for U.S. federal income tax purposes is an individual U.S. citizen or resident; a corporation created or organized in or under the laws of the United States or of any political subdivision thereof; an estate the income of which is subject to U.S. federal income taxation regardless of its source; a trust that (1) is subject to the primary supervision of a court within the United States and subject to the authority of one or more U.S. persons to control all substantial trust decisions, or (2) was in existence on August 20, 1996 and has properly elected under applicable Treasury regulations to be treated as a U.S. person; and any person or entity otherwise subject to U.S. federal income tax on a net income basis in respect of P&G common stock. For the avoidance of doubt, non-U.S. individuals and non-U.S. corporations that are subject to U.S. federal income tax on a net income basis in respect of P&G common stock, including by virtue of holding their common stock in connection with, as applicable, a U.S. trade or business or a U.S. permanent establishment, are treated as U.S. holders for purposes of this summary.

This discussion does not address the U.S. federal income tax consequences of the Galleria Transfer, the Distribution, the Merger and related transactions to a beneficial owner of P&G common stock that is not a U.S. holder. In addition, this discussion does not address the tax consequences of these transactions under applicable U.S. federal estate, gift or alternative minimum tax laws or any state, local or foreign laws, nor does it discuss any consequences arising under the unearned income Medicare contribution tax pursuant to the Health Care and Education Reconciliation Act of 2010 or any consequences that may result with respect to these transactions if the proposed Treasury regulations under section 385 of the Code, which were published in the Federal Register on April 8, 2016, are finalized.

This summary is of a general nature and does not purport to deal with all tax considerations that may be relevant to persons in special tax situations, including but not limited to:

 

    partnerships or other pass-through entities for U.S. federal income tax purposes, and investors in such entities;

 

    U.S. holders that are non-U.S. corporations and subject to the potential application of the “branch profits” tax;

 

    persons whose functional currency is not the U.S. dollar;

 

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    tax exempt entities;

 

    holders who acquired their shares pursuant to the exercise of employee stock options or otherwise acquired their shares as compensation or through a tax-qualified retirement plan;

 

    insurance companies;

 

    financial institutions;

 

    dealers in securities or currencies;

 

    traders in securities who elect to use a mark-to-market method of accounting;

 

    holders who hold their shares as part of a “hedge,” “straddle,” “conversion,” “synthetic security,” “integrated transaction,” “constructive sale” or other risk-reduction transaction; and

 

    mutual funds.

P&G shareholders should consult their own tax advisors concerning the tax consequences of the Distribution, the Merger and related transactions to them, including the application of U.S. federal, state, local, foreign and other tax laws in light of their particular circumstances. This summary is not intended to be, nor should it be construed to be, legal or tax advice to any particular investor.

The Distribution

P&G shareholders who have blocks of P&G common stock with different per share tax bases should consult their own tax advisors regarding the possible tax basis consequences to them of the Distribution.

It is a condition to completion of the Distribution that P&G receive a written opinion, dated as of the closing date of the Distribution, from Cadwalader, Wickersham & Taft LLP, special tax counsel to P&G, to the effect that the (1) Galleria Transfer, taken together with the Distribution, should qualify as a tax-free reorganization pursuant to section 368(a)(1)(D) of the Code, (2) Distribution, as such, should qualify as a distribution to P&G shareholders pursuant to section 355 of the Code, and (3) Merger should not cause section 355(e) of the Code to apply to the Distribution. It is a condition to the Distribution that this opinion not be withdrawn. The opinion will be based on, among other things, certain assumptions and representations as to factual matters and certain covenants made by P&G, Galleria Company, Coty and Merger Sub which, if incorrect or inaccurate in any material respect, would jeopardize the conclusions reached by special tax counsel in its opinion. It should be noted that there is a lack of binding administrative and judicial authority addressing the qualification under sections 355 and 368(a)(1)(D) of the Code of transactions substantially similar to the Distribution and the Merger, that the opinion will not be binding on the IRS or a court and that the IRS or a court may not agree with the opinion. As a result, while it is impossible to determine the likelihood that the IRS or a court could disagree with the conclusions of the above-described opinion, the IRS could assert, and a court could determine, that the Distribution and/or the Merger should be treated as taxable transactions. None of P&G, Galleria Company, Coty and Merger Sub is currently aware of any facts or circumstances that would cause the above-described assumptions and representations to be untrue or incorrect in any material respect that would preclude any of P&G, Galleria Company, Coty or Merger Sub from complying with all applicable covenants or that would otherwise jeopardize the conclusions reached by special tax counsel in its opinion. You should note that none of P&G, Galleria Company, Coty and Merger Sub intends to seek a ruling from the IRS as to the U.S. federal income tax treatment of the Transactions.

Principal Federal Income Tax Consequences to P&G of the Distribution

Subject to the qualifications and limitations set forth herein, Cadwalader, Wickersham & Taft LLP, special tax counsel to P&G, is of the opinion that, for U.S. federal income tax purposes, (1) the Galleria Transfer, taken together with the Distribution, should qualify as a tax-free reorganization pursuant to section 368(a)(1)(D) of the Code, (2) the Distribution, as such, should qualify as a distribution to P&G shareholders pursuant to section 355 of the Code, and (3) the Merger should not cause section 355(e) of the Code to apply to the Distribution. Accordingly, P&G generally should recognize no taxable gain or loss, and include no amount in income, for U.S. federal income tax purposes as a result of the Distribution, other than as a result of certain intercompany transactions.

 

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Special tax counsel is unable to opine definitively on the tax consequences due to the lack of binding administrative and judicial authority addressing the qualification under sections 355 and 368(a)(1)(D) of the Code of transactions substantially similar to the Distribution and the Merger. The opinion of special tax counsel is not binding on the IRS or a court, and the IRS or a court may not agree with the opinion. As a result, while it is impossible to determine the likelihood that the IRS or a court could disagree with the conclusions of the above-described opinion, the IRS could assert, and a court could determine, that the Distribution and/or the Merger should be treated as taxable transactions. None of P&G, Galleria Company, Coty and Merger Sub intends to seek a ruling from the IRS as to the U.S. federal income tax treatment of the Transactions.

The opinion of special tax counsel does not address any state, local or foreign tax consequences of the Distribution or the Merger. The opinion of special tax counsel is based on, among other things, certain assumptions and representations as to factual matters and certain covenants made by P&G, Galleria Company, Coty and Merger Sub. The opinion of special tax counsel cannot be relied upon if any of the assumptions, representations or covenants is incorrect or inaccurate or is violated in any material respect.

Principal Federal Income Tax Consequences to P&G Shareholders of the Distribution

Subject to the qualifications and limitations set forth herein, Cadwalader, Wickersham & Taft LLP, special tax counsel to P&G, is of the opinion that, for U.S. federal income tax purposes, the Distribution should have the following tax consequences to P&G shareholders who receive shares of Galleria Company common stock:

 

    no taxable gain or loss should be recognized by, and no amount included in the income of, P&G shareholders upon the receipt of shares of Galleria Company common stock in the exchange offer or in any subsequent pro rata dividend distributed to the Remaining P&G Shareholders if the exchange offer is completed but is not fully subscribed;

 

    the tax basis of the shares of Galleria Company common stock issued to a P&G shareholder in the exchange offer should equal the tax basis of the shares of P&G common stock exchanged therefor;

 

    the tax basis of the shares of Galleria Company common stock distributed to the Remaining P&G Shareholders as a subsequent pro rata dividend if the exchange offer is completed but is not fully subscribed should be determined by allocating the tax basis of such shareholder in the shares of P&G common stock with respect to which the subsequent pro rata dividend is made between such shares of P&G common stock and the shares of Galleria Company common stock in proportion to the relative fair market value of each on the Distribution date; and

 

    the holding period of the shares of Galleria Company common stock received by a P&G shareholder should include the holding period on the Distribution date of the shares of P&G common stock with respect to which the shares of Galleria Company common stock were received.

The opinion of special tax counsel is subject to the same qualifications and limitations as are set forth above in relation to the opinion of special tax counsel regarding the U.S. federal income tax consequences of the Distribution to P&G.

For information regarding the material U.S. federal income tax consequences of the Merger to P&G shareholders who receive shares of Galleria Company common stock in the Distribution, see “—The Merger” below.

Principal Federal Income Tax Consequences to P&G and P&G Shareholders if the Distribution Was Taxable

The Distribution would be taxable to P&G pursuant to section 355(e) of the Code if 50% or more (by vote or value) of P&G stock or Galleria Company stock were treated as acquired (including, in the latter case, through the acquisition of Coty stock in or after the Merger), directly or indirectly, by certain persons as part of a plan or series of related transactions that included the Distribution. Because P&G shareholders should be treated as owning more than 50% (by vote and value) of Coty’s stock immediately after the Merger, the Merger, by itself, should not cause the Distribution to be taxable to P&G under section 355(e) of the Code. However, if the IRS were to determine that other acquisitions of P&G stock, Galleria Company stock or Coty stock, as the case may

 

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be, either before or after the Distribution and the Merger, were part of a plan or series of related transactions that included the Distribution for purposes of section 355(e) of the Code, P&G could be required to recognize gain under section 355(e) of the Code, although the Distribution generally should remain tax-free to P&G shareholders (assuming the other requirements in sections 355 and 368 of the Code were satisfied). While P&G generally would recognize gain as if it had sold the shares of Galleria Company common stock distributed to P&G shareholders in the Distribution for an amount equal to the fair market value of such stock, P&G has agreed under the Tax Matters Agreement among P&G, Galleria Company, Coty and Merger Sub to make a protective election under section 336(e) of the Code with respect to the Distribution which generally causes a deemed sale of Galleria Company’s assets upon a taxable Distribution. The process for determining whether an acquisition of a 50% or greater interest in P&G or Galleria Company prohibited under the foregoing rules has occurred is complex, inherently factual and subject to interpretation of the facts and circumstances of a particular case.

If the Galleria Transfer and the Distribution, taken together, were to fail to qualify for U.S. federal income tax purposes as a reorganization under section 368(a)(1)(D) of the Code, then:

 

    the consolidated group of which P&G is the common parent would recognize a taxable gain equal to the excess of the fair market value of the assets transferred to Galleria Company plus liabilities assumed by Galleria Company over P&G’s tax basis in such assets;

 

    the exchange of shares of P&G common stock in the exchange offer would be a taxable exchange, and each holder that participated in the exchange offer would be treated as if P&G redeemed its common stock from such holder. In that case, each such holder would generally recognize capital gain or loss equal to the difference between the fair market value of the shares of Galleria Company common stock received and the holder’s tax basis in the shares of P&G common stock exchanged therefor, unless the redemption were considered essentially equivalent to a dividend (because the holder has not sufficiently decreased its actual and constructive ownership of P&G common stock as a result of the exchange offer), in which case such holder would be treated as having received a taxable distribution equal to the fair market value of the shares of Galleria Company common stock received which would be taxed as discussed in the immediately following bullet point;

 

    each holder that received shares of Galleria Company common stock as a subsequent pro rata dividend distribution if the exchange offer is completed but is not fully subscribed would be treated as if the holder received a taxable distribution equal to the fair market value of the shares of Galleria Company common stock received, which would be taxed (1) as a dividend to the extent of the holder’s pro rata share of P&G’s current and accumulated earnings and profits as determined under U.S. federal income tax principles (including earnings and profits attributable to the gain to P&G described in the first bullet point), then (2) as a non-taxable return of capital to the extent of the holder’s tax basis in the shares of P&G common stock with respect to which the distribution was made (the return of capital would thereby reduce the holder’s tax basis in such shares of P&G common stock), and finally (3) as capital gain with respect to the remaining value; and

 

    an individual holder would generally be subject to U.S. federal income tax at the prevailing long-term capital gains rate (assuming holding period and other requirements are met), which is currently 20%, with respect to the portion of the Distribution that was treated as a capital gain or qualified dividend, subject to exceptions for certain short-term positions (including positions held for one year or less, in the case of a capital gain), which could give rise to tax at ordinary income rates.

The Merger

It is a condition to consummation of the Merger that Coty and P&G receive written tax opinions from their respective special tax counsel, McDermott Will & Emery LLP and Cadwalader, Wickersham & Taft LLP, dated as of the closing date of the Merger, to the effect that the Merger will be treated for U.S. federal income tax purposes as a reorganization within the meaning of section 368(a) of the Code. It is a condition to the Merger that these opinions not be withdrawn. The opinions will rely on certain assumptions, including assumptions regarding the absence of changes in existing facts and law and the consummation of the Merger in the manner contemplated by the Transaction Agreement, and representations and covenants made by P&G, Galleria

 

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Company, Coty and Merger Sub, including those contained in representation letters of officers of Coty and P&G. If any of those representations, covenants or assumptions is inaccurate in any material respect, the opinions may not be relied upon, and the U.S. federal income tax consequences of the Merger could differ significantly from those discussed herein. In addition, these opinions are not binding on the IRS or any court, and none of Coty, Merger Sub, Galleria Company or P&G intends to request a ruling from the IRS regarding the U.S. federal income tax consequences of the Transactions. Consequently, there can be no certainty that the IRS will not challenge the conclusions reflected in the opinions or that a court would not sustain such a challenge.

Subject to the qualifications and limitations set forth herein, Cadwalader, Wickersham & Taft LLP, special tax counsel to P&G, is of the opinion that, for U.S. federal income tax purposes, the Merger will be treated as a reorganization within the meaning of section 368(a) of the Code. The opinion of special tax counsel is based on, among other things, certain assumptions and representations as to factual matters and certain covenants made by P&G, Galleria Company, Coty and Merger Sub. The opinion of special tax counsel cannot be relied upon if any of the assumptions, representations or covenants is incorrect or inaccurate or is violated in any material respect. The opinion of special tax counsel is not binding upon the IRS or the courts, and there is no assurance that the IRS or a court will not take a contrary position. None of P&G, Galleria Company, Coty and Merger Sub intends to seek a ruling from the IRS as to the U.S. federal income tax treatment of the Transactions.

Assuming that the Merger is treated as a reorganization within the meaning of section 368(a) of the Code, the Merger will have the following U.S. federal income tax consequences:

 

    none of P&G, Galleria Company, Coty or Merger Sub will recognize a taxable gain or loss in the Merger;

 

    no taxable gain or loss will be recognized by, and no amount will be included in the income of, P&G shareholders who exchange their shares of Galleria Company common stock for shares of Coty common stock in the Merger, except with respect to cash received in lieu of fractional shares of Coty common stock (as described below);

 

    the tax basis of shares of Coty common stock received in the Merger (including fractional shares for which cash is received) by P&G shareholders who receive shares of Galleria Company common stock in the Distribution will be the same as the tax basis of the shares of Galleria Company common stock exchanged therefor (which is as described above);

 

    the holding period of the shares of Coty common stock received in the Merger by P&G shareholders who exchange their shares of Galleria Company common stock received in the Distribution (including fractional shares for which cash is received) will include the holding period of the shares of Galleria Company common stock exchanged therefor (which is as described above); and

 

    taxable gain or loss will be recognized by P&G shareholders who receive cash in lieu of fractional shares of Coty common stock equal to the difference between the amount of cash received and their tax basis in their fractional shares of Coty common stock. The character of such taxable gain or loss will be capital gain or loss, and will be long-term capital gain or loss if the fractional shares of Coty common stock are treated as having been held for more than one year when the fractional shares are sold on the open market. The deductibility of capital losses is subject to limitation.

Information Reporting and Backup Withholding

P&G shareholders who own at least 5% (by vote or value) of P&G’s total outstanding stock and receive shares of Galleria Company common stock in the Distribution, and P&G shareholders who receive at least 1% (by vote or value) of the total outstanding stock of Galleria Company in the Distribution and then receive shares of Coty common stock in the Merger, must attach to their U.S. federal income tax return for the year in which the Distribution occurs a detailed statement setting forth the data appropriate to show the applicability of section 355 of the Code to the Distribution and section 368 of the Code to the Merger. P&G or Coty will provide the appropriate information to each holder upon request, and each such holder is required to retain permanent records of this information.

 

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Non-corporate holders of shares of P&G common stock that receive shares of Galleria Company common stock in the Distribution may be subject to backup withholding tax on any cash payments received in lieu of a fractional share of Coty common stock in the Merger. Any such holder will not be subject to backup withholding tax, however, if such holder furnishes a correct taxpayer identification number and certifies that such holder is not subject to backup withholding tax on the Form W-9 (or successor form) included in the letter of transmittal to be delivered to the holder following the consummation of the Merger or is otherwise exempt from backup withholding tax. Any amounts withheld under the backup withholding tax rules will be allowed as a refund or credit against the applicable holder’s U.S. federal income tax liability, provided that the holder furnishes the required information to the IRS.

 

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INFORMATION ON P&G

The Procter & Gamble Company was incorporated in Ohio in 1905, having been built from a business founded in 1837 by William Procter and James Gamble. Today, P&G manufactures and markets a broad range of consumer products in many countries throughout the world. P&G’s principal executive offices are located at One Procter & Gamble Plaza, Cincinnati, Ohio 45202, and its telephone number is (513) 983-1100.

P&G’s business is organized into ten product categories. Under GAAP, P&G’s Global Business Units (“GBUs”) underlying the ten product categories are aggregated into five reportable segments: Beauty; Grooming; Health Care; Fabric and Home Care; and Baby, Feminine and Family Care.

 

    Beauty includes conditioner, shampoo, styling aid, treatments, antiperspirant and deodorant, personal cleansing and skin care categories. Representative brands include Head & Shoulders, Pantene, Rejoice, Olay, Old Spice, Safeguard and SK-II.

 

    Grooming includes female and male blades and razors, pre-shave products, post-shave products, other shave care and appliance categories. Representative brands include, Braun, Fusion, Gillette, Mach3, Prestobarba and Venus.

 

    Health Care includes toothbrush, toothpaste, other oral care, gastrointestinal, rapid diagnostics, respiratory, vitamins/minerals/supplements and other personal health care categories. Representative brands include Crest, Oral-B, Prilosec and Vicks.

 

    Fabric Care and Home Care includes fabric enhancers, laundry additives, laundry detergents, air care, dish care, P&G Professional and surface care categories. Representative brands include Ariel, Dawn, Downy, Gain, Tide, Cascade, Dawn, Febreze, Mr. Clean and Swiffer.

 

    Baby, Feminine and Family Care includes baby wipes, baby diapers, baby pants, adult incontinence, feminine care, paper towels, tissues and toilet paper categories. Representative brands include Luvs, Pampers, Always, Tampax, Bounty and Charmin.

In the fiscal year ended June 30, 2016, the Beauty segment accounted for 18% of net sales; the Grooming segment accounted for 11% of net sales; the Health Care segment accounted for 11% of net sales; the Fabric Care and Home Care segment accounted for 32% of net sales; and the Baby, Feminine and Family Care segment accounted for 28% of net sales.

As of June 30, 2016, P&G owned and operated 24 manufacturing sites in the United States, located in 18 different states or territories. In addition, as of June 30, 2016, P&G owned and operated 97 manufacturing sites in 38 other countries. Many of the domestic and international facilities produce products for multiple P&G business units.

For a more detailed description of the business of P&G, see P&G’s Annual Report on Form 10-K for the fiscal year ended June 30, 2016, which has been filed with the SEC and is incorporated by reference into this prospectus. See “Where You Can Find More Information; Incorporation By Reference.”

 

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INFORMATION ON COTY

Overview

Coty is a leading global beauty company. Founded in Paris in 1904, Coty is a pure play beauty company with a portfolio of well-known brands that compete in the four segments in which Coty operates: Fragrances, Color Cosmetics, Skin & Body Care and, during fiscal 2016, Coty acquired the personal care and beauty business of Hypermarcas S.A. (the “Hypermarcas Beauty Business”), which represents a separate segment, Brazil Acquisition. Coty currently holds the #2 global position in fragrances, the #4 global position in color cosmetics and has a strong regional presence in skin & body care. Coty’s top 10 brands, which Coty refers to as its “power brands,” generated 70% of its net revenues in fiscal 2016 and comprise the following globally recognized brands: adidas, Calvin Klein, Chloé, DAVIDOFF, Marc Jacobs, OPI, philosophy, Playboy, Rimmel and Sally Hansen. Coty’s brands compete in all key distribution channels across both prestige and mass markets and in over 130 countries and territories.

Coty operates in the global beauty industry, which is attractive given its large scale, stable growth characteristics and demonstrated resiliency. Following the completion of the Transactions, the segments of the beauty industry in which Coty competes will include fragrances, color cosmetics, professional and retail hair color and styling, and skin and body care. According to Euromonitor, these combined segments generated approximately $300 billion of worldwide retail sales in calendar 2015. Coty believes the beauty industry is driven primarily by innovation, changes in consumer preferences and fashion trends in developed markets, and by a larger middle class and increased accessibility of beauty products in emerging markets.

Coty has transformed itself into a multi-segment beauty company with market leading positions in both North America and Europe through new product offerings, diversified sales channels and its global growth strategy. Today, Coty’s business has a diversified revenue base that generated net revenues in fiscal 2016 of 46%, 36%, 16% and 2% from Fragrances, Color Cosmetics, Skin & Body Care and Brazil Acquisition, respectively.

The following is a discussion of Coty prior to the consummation of the Merger. For a discussion of the combined company following the Transactions see “Business Strategies After the Transactions.” Additional information about Coty is included in documents incorporated by reference into this prospectus. See “Where You Can Find More Information; Incorporation By Reference.”

Coty’s Brands

Coty targets organic growth through its focus on supporting and expanding global brands while consistently developing and seeking to acquire new brands and licenses. Brand innovation and new product development are critical components of Coty’s success.

Coty’s “power brands,” each of which are described in further detail below, are at the core of Coty’s accomplishments. Coty invests aggressively behind current and prospective power brands and intends to continue to do so after consummation of the Merger. Coty’s power brands are its largest brands and those that it believes to have the greatest global potential to enhance Coty’s scale in the three beauty segments in which it competes.

 

    adidas. adidas is one of the biggest licensed brands in the global mass skin & body care market and maintains a significant presence in deodorants and shower gels. Coty’s adidas products for both men and women blend distinctive brand identity (through each fragrance and product design) and aspirations of performance to appeal to a broad range of consumers. Successful new product launches have contributed to adidas’ net revenues.

 

    Calvin Klein. Calvin Klein is Coty’s largest brand by net revenues and one of the largest fragrance brands by net revenues in the world. It holds strong positions in most developed markets, including the United States, the United Kingdom, Germany and Spain, and in emerging markets, such as China and the Middle East. The brand is also sold in the travel retail sales channel, including duty-free shops. The brand reaches a diverse consumer base through several strong product lines, including ck one, Eternity and euphoria.

 

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    Chloé. Chloé is a top women’s fragrance in the global prestige market. Chloé’s largest markets are travel retail, Italy, the United States, France, Germany and Spain. Notable launches for the brand include Chloé Signature, Chloé Love Story and See by Chloé.

 

    DAVIDOFF. DAVIDOFF is the #10 men’s fragrance brand in the worldwide prestige market. Cool Water, DAVIDOFF’s most successful line, is the #2 men’s fragrance brand in the German prestige market and the #9 men’s prestige fragrance brand in the world. It has been one of the world’s leading prestige men’s fragrances since 2006. DAVIDOFF Cool Water has joined forces with the National Geographic Society to support its Pristine Seas mission. This initiative aims to raise awareness about the importance of protecting the ocean.

 

    Marc Jacobs. Marc Jacobs is an iconic fragrance brand, with Daisy Marc Jacobs, Daisy Dream Marc Jacobs, Marc Jacobs Lola, Dot Marc Jacobs and the successful launch of Marc Jacobs Decadence in fall 2015. During fiscal 2016, Marc Jacobs Decadence won the Fragrance Foundation “Prestige Fragrance of the Year” award. The brand has been particularly successful in certain Asian markets, including China, and is a top ranking brand in global travel retail.

 

    OPI. OPI is the global leader in professional nail care. With a portfolio of approximately 300 creatively-named unique shades, OPI links fashion and entertainment with color cosmetics. OPI regularly creates limited-edition collections with celebrities and entertainment franchises to promote the brand, including collaborations with Gwen Stefani, Miss Piggy, the Muppets and Hello Kitty. OPI is sold through salons, travel retail and traditional retailers. OPI also markets nail gels, nail care products and nail accessories through salons. OPI is sold in over 100 countries and territories.

 

    philosophy. philosophy enjoys a strong market position in skin & body care in the U.S. prestige market and leverages multiple distribution channels, including direct television sales and e-commerce. philosophy’s miracle worker line was one of the most successful skin care launches in the U.S. prestige market the year it was launched. Building on the brand’s existing skincare franchises, philosophy’s key launches in fiscal 2016 included Ultimate Miracle Worker Multi Rejuvenating Cream Brand Spectrum SPF 30 and the lightweight breathable oxygen infused Take a Deep Breath collection of skin care and skin color. During fiscal 2016, philosophy’s purity made simple won Allure Magazine’s 2016 Reader’s Choice Award for Best Skin Facial Cleanser for its tenth consecutive year.

 

    Playboy. Playboy has become a strong mass market brand with established positions in Europe. Playboy offers a variety of deodorant, shower gel and fragrance products in both men and women markets.

 

    Rimmel. The Rimmel brand comprises a broad line of color cosmetics products covering the entire range of women’s color cosmetics, including eye, face, lip and nail products. Rimmel is sold in drugstores and other mass distribution channels. Rimmel is the #3 color cosmetics brand in the European retail mass market. Rimmel has been represented for more than ten years by Kate Moss, who has also developed and promoted her own signature line of Rimmel lipsticks. Most recently, the brand is also represented by model and actress Cara Delevingne, supermodel Georgia May Jagger, and international music star Rita Ora.

 

    Sally Hansen. Sally Hansen is the #1 nail care brand in North America. Coty believes that Sally Hansen has the most diversified and successful line of nail products in North America. Products in Coty’s Sally Hansen line include nail care products, nail color lacquers and nail and beauty implements and are sold in drugstores and other mass retailers. Coty also sells a broad range of depilatory and wax products through its Sally Hansen brand. In fiscal 2015, Coty launched Sally Hansen Miracle Gel for at-home gel manicures. Miracle Gel holds the #1 position in nail color in the United States and has won 48 industry awards to date, including the Nielsen 2016 Breakthrough Innovation Award for Miracle Gel. Although Sally Hansen is currently primarily a North American brand, it continues to expand its presence in Europe, Asia and South America by focusing on nail products. Miracle Gel, which has experienced steady growth since launch, has enabled Sally Hansen to grow net revenues in the North American and European markets.

 

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In addition to Coty’s power brands, Coty has a broad and deep portfolio of over 60 other brands, which accounted for 30% of its net revenues in fiscal 2016. These include regional brands such as Astor, Bourjois, Jil Sander, Joop! and Lancaster, celebrity brands such as Beyoncé, David Beckham, Jennifer Lopez and Katy Perry and emerging brands such as Roberto Cavalli, Bottega Veneta and Miu Miu.

On February 1, 2016, Coty completed its previously announced acquisition of the Hypermarcas Beauty Business. The Hypermarcas Beauty Business includes an offering of brands that hold leading positions in the highly competitive Brazilian beauty and personal care market, which is the third largest in the world. Brands that Coty acquired include Monage, a multi-category personal care brand; Risqué, the market leader in nail polish in Brazil; Bozzano, the market leader in men’s care in Brazil; Paixão, the largest skin care brand in Brazil; and Biocolor, a best-selling hair colorant in Brazil. The Hypermarcas Beauty Business comprises manufacturing and distribution facilities in the state of Goias, with go to market capabilities. As a result, it provides a platform for Coty to integrate its existing business and the Galleria business in Brazil and is intended to increase Coty’s exposure to higher growth emerging markets.

Coty’s Competitive Strengths

A portfolio of strong, well recognized beauty brands anchored by Coty’s “power brands” across three key beauty categories. The strength of Coty’s brand portfolio provides the foundation of its success. Coty believes its brands are valued by consumers across geographies and distribution channels. Coty believes that consumers appreciate the quality and innovation of its products across various price points and its ability to quickly and cost-effectively innovate and draw excitement to its products.

Global leader in fragrances. Coty’s #2 global position in fragrances is a result of the strength, scale and balance of its brands. The brands in Coty’s Fragrances segment include brands associated with fashion designers, lifestyle brands and brands associated with entertainment personalities. Coty’s top fragrance brands by percentage of net revenues are Calvin Klein, Marc Jacobs, DAVIDOFF and Chloé. Coty has launched several new fragrance brands since 2011, including Balenciaga, Beyoncé, Bottega Veneta, Guess?, Katy Perry, Miu Miu and Roberto Cavalli.

Leading player in color cosmetics. Coty historically achieved its #4 global ranking in color cosmetics and #2 ranking in the combined North American and European mass retail markets by identifying and investing in new trends in cosmetics and nail care, introducing innovative products to the market and expanding distribution globally. Coty continues to build on these foundations organically through new product innovations and strategically through acquisitions such as Bourjois. Coty’s growth in the nail category continues to be fueled by outstanding innovation. For example, in 2015 Coty launched OPI Hello Kitty collection, OPI Infinite Shine and Sally Hansen Miracle Gel. Outside of nail products, in 2015 Coty introduced Astor Lash Beautifier mascara, Rimmel Supercurler mascara and Rimmel the Only 1 lipstick.

Licensee of choice. Coty has a track record of partnering with unique brands while respecting and preserving each licensor’s brand identity. In addition, Coty’s global scale allows it to offer its licensed products in multiple points of distribution and in multiple geographies. Marc Jacobs and Chloé are examples of licensed designer brands that have organically grown from low revenue bases to be two of Coty’s most highly valued and fastest growing brands. Similarly, Coty grew Playboy from a low revenue base and expanded it globally. Coty intends to seek to replicate this growth with high potential brands in the future and will continue to build on its success by partnering with highly sought-after celebrities. Coty believes it is a preferred licensee for potential partners, with opportunities for Coty to further develop existing brand licenses as well.

Superior innovation driven by entrepreneurial culture. Coty believes its entrepreneurial culture allows it to act faster and push marketing and creative boundaries further than its competitors. Coty’s past success demonstrates that it is poised to turn innovative ideas into realities with agility, decisiveness and calculated risk taking, all at a high level of execution. Over the last three fiscal years, sales from Coty’s new products accounted for approximately 16% of its total net revenues, on average.

 

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Product, channel and geographic diversity. Coty has breadth across beauty segments with product offerings in fragrances, color cosmetics and skin & body care. It has a balanced multi-channel distribution strategy and markets products across price points in prestige and mass channels of distribution, including department stores, specialty retailers, traditional food, drug and mass retailers, salons, travel retail, e-commerce and television sales, among others. Coty believes its commercial expertise enhances its capabilities when it enters new markets where products must suit local consumer preferences, incomes and demographics. Coty’s beauty products are marketed, sold and distributed to consumers in over 130 countries and territories. Coty believes its diverse, globally recognized product portfolio positions it well to expand its leadership broadly into new geographies, in both developed and emerging markets.

Compelling financial platform. Coty benefits from healthy and improving operating margins, as demonstrated by an improvement in its adjusted operating margin from 13.7% in fiscal 2015 to 14.3% in fiscal 2016. Coty also generates strong and consistent operating cash flow, which totaled $501.4 million in fiscal 2016, $526.3 million in fiscal 2015 and $536.5 million in fiscal 2014. In addition, Coty’s global efficiency program announced in August 2014 remains on track, as Coty has recognized cumulative savings of approximately $230 million through the end of fiscal 2016, driven by fixed cost reduction, indirect procurement savings, footprint consolidation and more streamlined operations in China. Coty believes its global efficiency program will address the different cost components of its business, and it anticipates that annual savings from the program will now be $270 million by the end of fiscal year 2017.

Coty’s Segments

Fragrances

Coty holds the #2 global position in fragrances. Coty believes that its success in fragrances results from a combination of strong executive leadership, global expansion, innovation, organic growth, acquisitions, product line extensions and new licenses.

Coty’s fragrance products include a variety of men’s and women’s products. Brands in the Fragrances segment include brands associated with fashion designers, lifestyle brands and brands associated with entertainment personalities. Coty sells its fragrance products in all distribution channels, from mass to prestige, including travel and retail, to target consumers across all incomes, ages and geographies that it considers important to its business.

Coty owns certain of the trademarks associated with its fragrance products and licenses other trademarks from celebrities, fashion houses and other lifestyle brands. In fiscal 2016, Coty manufactured 85% of its fragrance products at its manufacturing facilities, and marketed and distributed its fragrance products globally through local affiliates and third-party distributors.

Coty’s top fragrance brands by percentage of net revenues are Calvin Klein, Marc Jacobs, DAVIDOFF and Chloé. Coty has launched several new fragrance brands since 2011, including Balenciaga, Beyoncé, Bottega Veneta, Guess?, Katy Perry, Miu Miu and Roberto Cavalli.

Color Cosmetics

Coty is an emerging leader in color cosmetics. Coty is ranked 4th globally and 2nd in the combined North American and European mass retail markets. Coty’s color cosmetics products include lip, eye, nail and facial color products. It maintains a #2 position in nail care products globally.

Coty has 10 brands in its Color Cosmetics segment, including Bourjois, which was acquired in fiscal 2015. Coty’s top color cosmetics brands by percentage of net revenues are Rimmel, Sally Hansen and OPI. Most of Coty’s color cosmetics products are sold within mass distribution channels, with OPI mostly sold in professional distribution channels. Coty’s strength in color cosmetics is driven by its OPI, Rimmel and Sally Hansen brands.

 

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Coty owns all the brands in its Color Cosmetics segment and their associated trademarks. Coty associates celebrities’ images in the advertising of some of its color cosmetics brands such as Cara Delevingne, Kate Moss, Georgia May Jagger and Rita Ora for Rimmel, Demi Lovato for N.Y.C. New York Color and Heidi Klum for Astor. In fiscal 2016, Coty manufactured 64% of its color cosmetics products at its manufacturing facilities. Coty markets and distributes its color cosmetics products globally through its subsidiaries and third-party distributors.

Skin & Body Care

Coty continues to develop the brands and product lines in its Skin & Body Care segment and to expand its product offerings. Coty’s skin & body care products include shower gels, deodorants, skin care and sun treatment products. Its skin & body care brands are adidas, Lancaster, philosophy and Playboy. Lancaster and philosophy are sold in prestige distribution channels and adidas and Playboy are sold in mass distribution channels.

Coty owns Lancaster and philosophy and their trademarks, and licenses the trademarks associated with adidas and Playboy. In fiscal 2016, Coty manufactured 62% of its skin & body care products at its manufacturing facilities. Coty markets and distributes its skin & body care products globally through its subsidiaries and third-party distributors.

Brazil Acquisition

During fiscal 2016, Coty acquired the Hypermarcas Beauty Business. This acquisition represents a separate segment, Brazil Acquisition. The Brazil Acquisition segment represents revenues and expenses generated from multiple product groupings such as skin care, nail care, deodorants, and hair care products which are principally sold within Brazil.

Coty’s Brazil Acquisition segment net revenues represented 2% of Coty’s net revenues in fiscal 2016. In fiscal 2016, Coty’s Brazil Acquisition segment generated $95.5 million in net revenues and $1.5 million in operating income (loss).

Research and Development

Research and development is a pillar of Coty’s innovation. It combines cutting-edge research and technology, new ingredients and precise market testing, enabling Coty to develop and support the development of new products while continuing to improve Coty’s existing products. Key new product developments with significant product innovation components in calendar years 2014 and 2015 included Rimmel Wonder’Lash mascara with Argan Oil, a patented creamy, volumizing and conditioning mascara, Sally Hansen Miracle Gel 2.0, the only two-step gel manicure with a plumping top coat that does not require light, philosophy ultimate miracle worker, featuring a patented multi-protection formula for the face and eyes, and Lancaster 365 Skin Repair Serum, which helps manage aging at the roots. In calendar year 2016, Coty’s new product developments included Lancaster’s new generation sun protection that targets all rays of light in the known solar spectrum. Coty’s products have received numerous awards, including awards from The Fragrance Foundation and CLIO.

Coty continuously seeks to improve its products through research and development, and strives to provide the consumer with the best possible products. Coty’s research and development teams work with the marketing and operations teams to identify recent trends and consumer needs and to bring products quickly to market. Additionally, Coty’s basic and applied research groups, which conduct longer-term research such as “blue sky” research, seek to develop proprietary new technologies for first-to-market products and for improving existing products. This research and development is done both internally and through affiliations with various universities, technical centers, supply partners, industry associations and technical associations. As of June 30, 2016, Coty owned approximately 800 patents and patent applications globally.

Coty performs extensive testing on its products, including testing for safety, packaging, toxicology, in vitro eye irritation, microbiology, quality and stability. It also has a robust internal and external testing program that includes sensory, consumer and clinical testing. Coty does not conduct animal testing on its products or

 

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ingredients, nor does it engage others to undertake such testing on its behalf, except when required by local country laws.

As of June 30, 2016, Coty had approximately 300 employees engaged in research and development. Research and development expenditures totaled 1.1%, 1.1% and 1.0% of net revenues in fiscal 2016, 2015 and 2014, respectively. Coty maintains six research and development centers, which are located in the United States, Europe, Brazil and China.

Suppliers, Manufacturing and Related Operations

Coty manufactures approximately 68% of its products in eight facilities around the world. These facilities are located in the United States, Europe, Brazil and China. Several of these locations provide multi-segment manufacturing. Approximately 30% of Coty’s finished products are manufactured to its specifications by third parties.

Coty continues to streamline its manufacturing processes and identify sourcing opportunities to improve innovation, customer service and product quality, increase efficiencies and reduce costs. Coty has a dedicated worldwide procurement team that it believes follows industry best practices and that is making a concentrated effort to reduce costs associated with third-party suppliers. While Coty believes that its manufacturing facilities are sufficient to meet current and reasonably anticipated manufacturing requirements, it continues to identify opportunities to make improvements in productivity. For example, it is streamlining its manufacturing facilities to optimize costs. Coty will evaluate whether to consolidate facilities and eliminate unnecessary lease expense in areas where both Coty and P&G Beauty Brands have historically had an office. To capitalize on supply chain benefits, Coty will continue to complement its own manufacturing network with the use of pertinent third parties on a global basis for finished goods production.

The principal raw materials used in the manufacture of Coty’s products are essential oils, alcohol and specialty chemicals. The essential oils in fragrance products are generally sourced from fragrance houses. As a result, Coty realizes material cost savings and benefits from the technology, innovation and resources provided by these fragrance houses.

Coty purchases the raw materials for all its products from various third parties. It also purchases packaging components that are manufactured to its design specifications. Coty works in collaboration with its suppliers to meet its stringent design and creative criteria. In fiscal 2016, no single supplier accounted for more than 10% of the materials used in the manufacture of Coty’s products.

Coty regularly benchmarks the performance of its supply chain and adjusts its suppliers and distribution networks and manufacturing footprint based upon the changing needs of its business. Coty is always considering new ways to improve its overall supply chain performance through better use of its production and sourcing capabilities. Coty believes that it currently has adequate sources of supply for all its products. It has not experienced material disruptions in its supply chain in the past, and it believes it has robust practices in place to respond to any potential disruptions in its supply chain.

Coty has established a global distribution network designed to meet the changing demands of its customers while maintaining service levels. In fiscal 2015, Coty received awards in Leadership and Strategy and Manufacturing in Action from the Manufacturer of the Year Awards. Coty is continuing to evaluate and restructure its physical distribution network to increase efficiency and reduce its order lead times.

Coty also recognizes the importance of its employees and has programs in place designed to ensure operating safety. Coty also has in place programs designed to ensure that its manufacturing and distribution facilities comply with applicable environmental rules and regulations, and these programs have improved its employee safety as benchmarked against industry levels.

 

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Marketing and Sales

Coty has dedicated marketing and sales forces (including ancillary support services) in most of its significant markets. Coty believes that local teams dedicated to the commercialization of its brands gives it the greatest opportunity to execute its business strategy. Coty is also developing branding and marketing execution strategies with its top customers.

Coty’s marketing strategy creates a distinct image and personality for each brand. Many of its products are linked to recognized designers and design houses such as Balenciaga, Bottega Veneta, Calvin Klein, Chloé, Marc Jacobs, Miu Miu and Robert Cavalli, celebrities, such as Beyoncé Knowles, David Beckham, Enrique Iglesias, Jennifer Lopez and Katy Perry, and lifestyle brands, such as adidas, DAVIDOFF and Playboy. Each of its brands is promoted with consistent logos, packaging and advertising designed to enhance its image and the uniqueness of each brand. Coty’s strategy is to promote these brands mostly in television, print, outdoor ads, in-store displays and online on brand sites and social networks. Coty also leverages its relationships with celebrities to endorse certain of its products. Recent campaigns include Cara Delevingne, Kate Moss and Georgia May Jagger for Rimmel, Jasmine Tookes and Tobias Sorensen for Calvin Klein Eternity NOW, Christy Turlington and Ed Burns for Calvin Klein Eternity and a television spot for Marc Jacobs Daisy Dream directed by long-time Marc Jacobs muse Sofia Coppola.

Coty’s marketing efforts also benefit from cooperative advertising programs with retailers, often in connection with in-store marketing activities. Such activities are designed to attract consumers to Coty’s counters, displays and walls and make them try, or purchase, Coty’s products. Coty also engages in sampling and “gift-with-purchase” programs designed to stimulate product trials. Coty has more recently been expanding its digital marketing efforts, including through websites it does not control or operate, with a multi-pronged strategy that ranges from brand sites, social networking campaigns and blogs, to e-commerce. Currently, 41 Coty brands have marketing sites, 36 have social networking activities, two have e-commerce capabilities and 12 are sold on branded e-commerce sites. Coty also partners with key “brick and mortar” retailers in its expansion into e-commerce.

Coty plans to expand its marketing efforts through the formation of a new department focused on accelerating growth by improving capabilities in areas such as innovation, traditional digital communication, sales execution and e-commerce. As a precursor to the formation of this new department, in October 2015, Coty entered into a definitive agreement to acquire Beamly Ltd (“Beamly”), a digital marketing firm based in New York and London. Since announcing the acquisition, Beamly has started to work with the Coty brands on several digital and social media campaigns. Coty expects the acquisition to enhance its digital engagement capabilities and to allow Coty to better address the accelerating consumer shift in time spent from traditional media to real time digital and social media channels. Coty believes Beamly will be an important aspect of establishing within the Coty organization that digital is a critical component of marketing and a valuable way of communicating and engaging with consumers. Coty believes it will also benefit from Beamly’s social data benchmarking, content creation, content optimization and consumer engagement tools to grow its e-commerce business.

Distribution Channels and Retail Sales

Coty currently has offices in more than 35 countries and markets, sells and distributes its products in over 130 countries and territories.

Coty has a balanced multi-channel distribution strategy and market products across price points in prestige and mass channels of distribution. It offers certain products through multiple distribution channels to reach a broader range of customers. Coty sells products in each of its segments through retailers, including hypermarkets, supermarkets, independent and chain drug stores and pharmacies, upscale perfumeries, upscale and mid-tier department stores, nail salons, specialty retailers, duty-free shops and traditional food, drug and mass retailers. Its principal retailers in the mass distribution channel include CVS, Shoppers Drug Mart, Target, Walgreens and Wal-Mart in the Americas; Auchan, Carrefour, DM Drogerie Markt, Tesco and Watson’s in Europe, the Middle

 

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East and Africa (“EMEA”); and Chemist Warehouse Group, Priceline Pharmacies and Watsons in Asia Pacific. Its principal retailers in the prestige distribution channel include Macy’s and Ulta in the Americas; Beauty Alliance, Boots, Mueller, Parfumerie Douglas and Watson in EMEA; Chemist Warehouse Group and Priceline Pharmacies in Asia Pacific; and Sephora in multiple geographic regions. Other principal retailers include Kohl’s and QVC in the Americas. In fiscal 2016, no retailer accounted for more than 10% of Coty’s global net revenues; however, certain retailers accounted for more than 10% of net revenues within certain geographic markets. In fiscal 2016, Coty’s top ten retailers combined accounted for 29% of net revenues and Wal-Mart, its top retailer, accounted for 7% of net revenues. Coty is pursuing its strategy of geographic expansion by selling through retailers, its subsidiaries or third-party distributors and its strategy of increasing its presence in e-commerce by selling through websites that support an e-commerce-only product distribution business, including its own branded websites. Coty believes its commercial expertise enhances its capabilities when it enters new markets where products must suit local consumer preferences, incomes and demographics.

Coty also sells a broad range of its products through travel retail sales channels, including duty-free shops, airlines, cruise lines and other tax-free zones. Travel retail sales channels represented 6% of its net revenues in fiscal 2016. In addition, Coty sells its products through the internet over its retail partners’ e-commerce sites and through online retailers. It sells its philosophy products through philosophy-branded websites and through direct marketing via television.

In countries and territories in which Coty sells its products but where it does not have a subsidiary, its products are sold through third-party distributors. Distributors in different countries or territories may sell to different types of customers, such as traditional retailers or via direct marketing. In some cases, Coty also outsources functions or parts of functions that can be performed more effectively by external service providers. Coty directs its third-party service providers and distributors in the marketing, advertising and promotion of its products. Its third-party distributors contribute knowledge of the local market and dedicated sales personnel.

Consumer preferences are driving the trend towards multi-channel distribution for beauty products, and Coty intends to continue to develop and expand its multi-channel distribution strategies in response to and in anticipation of consumer demand trends.

Legal Proceedings

Coty has disclosed information about certain legal proceedings in Part I, Item 3 under the heading “Legal Proceedings” of its Annual Report on Form 10-K for the fiscal year ended June 30, 2016, which is incorporated by reference in this prospectus. There have been no subsequent material developments to these matters.

Coty is involved, from time to time, in litigation, other regulatory actions and other legal proceedings incidental to Coty’s business. Other than as previously disclosed in Coty’s Annual Report on Form 10-K for the fiscal year ended June 30, 2016, management believes that current litigation, regulatory actions and legal proceedings will not have a material effect upon Coty’s business, results of operations, financial condition or cash flows. However, management’s assessment of Coty’s current litigation, regulatory actions and other legal proceedings could change in light of the discovery of facts with respect to litigation, regulatory actions or other proceedings pending against Coty not presently known to Coty or determinations by judges, juries or other finders of fact which are not in accord with management’s evaluation of the possible liability or outcome of such litigation, regulatory actions and legal proceedings.

Directors and Executive Officers

Coty Board of Directors

The directors of Coty immediately following the closing of the Transactions are expected to be the directors of Coty immediately prior to the closing of the Transactions, except that Camillo Pane, Coty’s current Executive Vice President, Category Development, has been appointed to the position of CEO and to Coty’s board of directors, each effective as of the day following the completion of the Transactions.

 

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Listed below is the biographical information for each person who is currently a member of Coty’s board of directors.

Lambertus J.H. Becht. Mr. Becht, 60, joined Coty’s board of directors as Chairman in 2011 and became Coty’s interim CEO in September 2014. He also serves as the Chairman of the board of directors of Jacobs Douwe Egberts B.V. and Chairman of the board of directors of the parent of Keurig Green Mountain, Inc., as well as a non-executive director of Peet’s Coffee & Tea Inc. and the Caribou Coffee Company, Inc./Einstein Noah Restaurant Group, Inc. Mr. Becht is also a partner and Chairman of the JAB Group. From 1999 to August 2011, Mr. Becht was Chief Executive Officer of Reckitt Benckiser Group plc, a leading global consumer goods company in the field of household cleaning and health and personal care. Prior to that, Mr. Becht was Chief Executive Officer of privately held Benckiser Detergents, which in 1997 became Benckiser N.V. and listed on the Amsterdam and New York Stock Exchanges, and in 1999 merged with Reckitt & Colman plc and listed on the London Stock Exchange. Before becoming Chief Executive Officer of Benckiser Detergents in 1995, Mr. Becht held a variety of marketing, sales and finance positions at P&G in the United States and Germany and served within Benckiser Detergents as General Manager in Canada, the United Kingdom, France and Italy. Mr. Becht holds a Master of Business Administration degree from the University of Chicago Booth School of Business and a Bachelor of Arts degree in Economics from the University of Groningen in the Netherlands.

Mr. Becht will step down as Coty’s interim CEO effective as of the day following the closing of the Transactions, but will continue to serve as Chairman of Coty’s board of directors.

Joachim Faber. Mr. Faber, 66, joined Coty’s board of directors in 2010. Mr. Faber is also the Chairman of the Supervisory Board of Deutsche Börse AG, Frankfurt, a member of the board of HSBC Holdings PLC, London, Chairman of the Shareholder Committee of JAB Holding Company S.á r.l. and a member of the board of Allianz S.A., Paris. Mr. Faber was a member of the Supervisory Board of OSRAM Licht AG and the Chairman of its audit committee until June 30, 2014. Until 2011, Mr. Faber served as the Chief Executive Officer of Allianz Global Investors, a global asset management company, and a member of the management board of Allianz SE in Munich. Prior to joining Allianz in 1997, he worked for 14 years in various positions for Citicorp in Frankfurt and London. He serves on the board of German Cancer Aid in Bonn and the European School for Management and Technology in Berlin. Mr. Faber graduated from the University of Bonn with a degree in Law. He received his PhD degree from the Postgraduate National School of Public Administration Speyer, Germany after completing his research at the Sorbonne University in Paris, France.

Olivier Goudet. Mr. Goudet, 51, joined Coty’s board of directors in May 2013. Mr. Goudet is Partner and Chief Executive Officer of the JAB Group, a position he has held since June 2012. He started his professional career in 1990 at Mars, Inc., serving on the finance team of the French business. After six years, he left Mars, Inc. to join the VALEO Group, where he held several senior executive positions, including Chief Financial Officer. In 1998, he returned to Mars, Inc., where he later became Chief Financial Officer in 2004. In 2008, his role was broadened, and he was appointed Executive Vice President and Chief Financial Officer until April 2012. Between June 2012 and November 2015, Mr. Goudet served as an Advisor to the Board of Mars, Inc. In January 2013, Mr. Goudet became the Chairman of Peet’s Coffee & Tea Inc. In September 2013, Mr. Goudet was appointed as board member of Jacobs Douwe Egberts B.V. Mr. Goudet is also Chairman of the Caribou Coffee Company, Inc./Einstein Restaurant Group, Inc. and a board member of Espresso-House Holding AB and the parent company of Keurig Green Mountain, Inc. In September 2014, Mr. Goudet joined the board of Jimmy Choo PLC. In April 2015, he became the Chairman of the board of directors of Anheuser-Busch InBev SA/NV. Mr. Goudet holds a Degree in Engineering from l’Ecole Centrale de Paris and graduated from the ESSEC Business School in Paris with a major in Finance.

Peter Harf. Mr. Harf, 70, joined Coty’s board of directors in 1996 and serves as Chair of the Remuneration and Nomination Committee. Mr. Harf was Chairman of Coty’s board of directors from 2001 until 2011 and Chief Executive Officer of Coty from 1993 to 2001. He is Chief Executive Officer of Lucresca and Agnaten, which indirectly share voting and investment control over shares of Coty. Mr. Harf joined JAB in 1981, serving the

 

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company in a variety of capacities, including Chairman and Chief Executive Officer since 1988. In September 2014, Mr. Harf became the Chairman and member of the board of directors of Jimmy Choo PLC. Mr. Harf is also a board member of the Caribou Coffee Company, Inc./Einstein Noah Restaurant Group, Inc., Peet’s Coffee & Tea Inc., Jacobs Douwe Egberts B.V. and the parent company of Keurig Green Mountain, Inc. and Chairman of Espresso-House Holding AB and co-founder and Executive Chairman of DKMS. Prior to joining the JAB group, Mr. Harf was Senior Vice President of Corporate Planning at AEG-Telefunken, Frankfurt, Germany. He began his career at the Boston Consulting Group. Mr. Harf was Deputy Chairman of the Board of Directors of Reckitt Benckiser Group plc from 1999 to December 2015, and was Chairman of the Board of Directors and a member of the audit committee of Anheuser-Busch InBev SA/NV until 2012. Mr. Harf holds a Master of Business Administration degree from Harvard Business School and a Diploma and a Doctorate in Economics from the University of Cologne in Germany.

Paul S. Michaels. Mr. Michaels, 64, joined Coty’s board of directors in June 2015. Prior to joining Coty, Paul S. Michaels served as the President of Mars, Incorporated, parent company of William Wrigley Jr. Co., from January 2004 to January 2015. Mr. Michaels began his career at P&G and later moved to Johnson & Johnson, where he spent 15 years building many of the company’s flagship brands. Mr. Michaels holds a Bachelor of Arts from the University of Notre Dame.

Erhard Schoewel. Mr. Schoewel, 67, joined Coty’s board of directors in 2006. From 1999 to 2006, he was Executive Vice President responsible for Europe at Reckitt Benckiser plc. From 1979 to 1999 he held positions of increasing responsibilities at Benckiser. Prior to that, he worked for PWA Waldhof. In 2012, Mr. Schoewel was elected to the Supervisory Board of the Jahr Holding GmbH & Co. KG in Hamburg, Germany. From 2007 to 2015, he was Chairman of Birdseye Iglo Ltd London and a director of Phorms SE Berlin. Mr. Schoewel received a Diplom-Kaufmann degree from University of Pforzheim.

Robert Singer. Mr. Singer, 64, joined Coty’s board of directors in 2010, and serves as Chair of the Audit and Finance Committee. From 2006 to 2009 he served as Chief Executive Officer of Barilla Holding S.p.A., an Italian food company, and before that he served as the President and Chief Operating Officer of Abercrombie and Fitch Co. from 2004 until 2005. He served as Chief Financial Officer of Gucci Group N.V. from 1995 to 2004. Mr. Singer started his career at Coopers & Lybrand in 1977. Since 2009, Mr. Singer has also served as a director of Gianni Versace S.p.A. and a director of Mead Johnson Nutrition. He also serves as a director and chair of the audit committees of Tiffany & Co. and Jimmy Choo PLC. Mr. Singer has served as a senior advisor to CCMP Capital Advisors, LLC since 2011. He received a Bachelor of Arts Humanities degree from Johns Hopkins University, a Master of Arts degree in Comparative Literature from University of California, Irvine and graduated from New York University with a Master of Science in Accounting.

In addition, on July 15, 2016, Coty’s board of directors appointed Camillo Pane, Coty’s current Executive Vice President, Category Development, to the position of Coty’s CEO and to Coty’s board of directors, each effective as of the day following the closing of the Transactions. Mr. Pane will succeed Mr. Becht. Mr. Becht will continue to serve as Chairman of Coty’s board of directors following the closing of the Transactions. For Mr. Pane’s biography, see “—Coty Executive Officers—Camillo Pane” below.

Coty Executive Officers

Listed below is the biographical information for each person who is expected to be an executive officer of Coty following the closing of the Transactions and whose biographical information is not set forth above under “—Coty Board of Directors.”

Patrice de Talhouët. Mr. de Talhouët, 50, is Chief Financial Officer and a member of the Coty Executive Committee. Mr. de Talhouët oversees strategic leadership for corporate finance, planning and budgeting, treasury, tax and fiscal management and information technologies, as well as business development and mergers and acquisitions. He has more than 20 years of comprehensive global financial experience. Prior to joining Coty

 

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as Chief Financial Officer in January 2014, Mr. de Talhouët spent nearly seven years with food products manufacturer Mars, Inc., serving as Corporate Finance Officer Americas and a member of the finance executive committee from April 2011 to December 2013 and Chief Financial Officer Europe Mars Chocolate from January 2007 to March 2011. Before joining Mars, Inc., Mr. de Talhouët spent more than a decade in senior finance positions at Alcatel-Lucent. Mr. de Talhouët started his career at Société Générale S.A. bank. Mr. de Talhouët has served as a member of Devoteam’s Remuneration Committee from 2002 through 2010 and of Devoteam’s Audit Committee since 2011. He holds a Bachelor’s degree in Economics and International Management from Nanterre University and as well as a Master’s degree in Finance, Accounting and Corporate Law from Conservatoire National des Arts et Métiers (CNAM).

Sebastien Froidefond. Mr. Froidefond, 48, is Senior Vice President of Human Resources at Coty and a member of the Coty Executive Committee. Mr. Froidefond leads Coty’s worldwide human resources department and oversees all global employee communication initiatives. Prior to joining Coty in August 2015, Mr. Froidefond was Managing Director of Spire S.A.S. and Human Resources Vice President for the Global Consumer Healthcare division of Sanofi. From 2001 until his appointment as Sanofi’s Human Resources Vice President, Mr. Froidefond served in various roles of increasing responsibility within Sanofi’s human resources functions in the United Kingdom, Latin America, Africa, Turkey, the Middle East, Eurasia and South Asia. He has over 20 years of experience in building and leading world class human resources organizations at country, regional and global levels. Mr. Froidefond holds a Master in Economics from Université Paris X and an advanced degree in consulting from Institut Supérieur de Gestion.

Edgar O. Huber. Mr. Huber, 54, is President of Global Markets of Coty and is a member of the Coty Executive Committee. Mr. Huber has served in this position since November 2015 and oversees sales execution and steers Coty’s business according to specific consumer and retailer needs and priorities. Prior to joining Coty, Mr. Huber was Director, President and Chief Executive Officer of Lands’ End, Inc., a leading global apparel retail brand, from 2011 until 2015. He served as President and Chief Executive Officer of the Juicy Couture Division of Liz Claiborne, Inc., from September 2008 until January 2011. He has over 15 years of service in a number of senior roles at L’Oréal, S.A. and he was a key account and brand manager for Mars, Inc. Mr. Huber holds a Bachelor of Arts Degree from the Handelsakademie Innsbruck/Telfs, Austria and a Masters of Business Administration from the Wirtschaftsuniversität Wien (Vienna University of Economics and Business), Austria. Mr. Huber has also completed the International Management Program at HEC (Haute Etudes Commerciales) in Jouy-en-Josas, France, and the CEDEP (General Management Program) at INSEAD in Foutainbleau, France.

Jules P. Kaufman. Mr. Kaufman, 58, is Senior Vice President, General Counsel and Secretary of Coty and a member of the Coty Executive Committee. In his role as General Counsel, he oversees Coty’s legal affairs worldwide, including, among other things, acquisitions and divestitures, corporate governance, securities compliance, intellectual property, licensing and regulatory issues. Mr. Kaufman has more than 30 years of comprehensive legal experience. Prior to joining Coty as General Counsel in January 2008, he served in Paris and Geneva as Vice President and Division General Counsel for Colgate-Palmolive Company’s Europe/South Pacific division. Prior to that, Mr. Kaufman had responsibility for mergers and acquisitions, SEC, finance and corporate governance matters within the Colgate corporate legal group. Mr. Kaufman began his career as a corporate lawyer with two New York City based law firms. He received his Bachelor of Arts degree from Harvard University and his Juris Doctor from the University of Virginia School of Law.

Ralph Macchio. Mr. Macchio, 59, is Chief Scientific Officer and Senior Vice President of Global Research & Development at Coty and is a member of the Coty Executive Committee. He is responsible for all Scientific Affairs and Global Regulatory Affairs at Coty and the Global Consumer Affairs Team. Mr. Macchio has over 30 years of cosmetic research and development experience. Since joining Coty in 1992, Mr. Macchio has held various positions of increasing responsibility at Coty. Prior to becoming Chief Scientific Officer and Senior Vice President of Global Research and Development in 2007, Mr. Macchio served as Vice President of Global Research and Development. Prior to joining Coty, Mr. Macchio held several positions at Revlon Inc., including Departmental Manager, Color Cosmetics. He received degrees in Biochemistry and Chemistry from the State University of New York at Albany.

 

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Camillo Pane. Mr. Pane, 45, is Executive Vice President, Category Development and a member of the Coty Executive Committee and, effective as of the day following the closing of the Transactions, Mr. Pane will become Coty’s CEO and a member of Coty’s board of directors. Prior to joining Coty in this position in July 2015, Mr. Pane spent 20 years with Reckitt Benckiser Group plc, where he held numerous high profile international marketing and general management roles throughout his career, in both developed and emerging markets, most recently as Senior Vice President, Global Category Officer Consumer Health from July 2011 until July 2015. Mr. Pane holds a degree in business administration from the University of Bocconi in Milan.

Mario Reis. Mr. Reis, 57, is Executive Vice President, Supply Chain and a member of the Coty Executive Committee. Mr. Reis brings diversified experience in supply chain and commercial fields with a unique perspective and a strong skill set for a best in class end-to-end supply chain. Mr. Reis has more than 30 years of experience as a solid business leader and supply chain expert. Prior to joining Coty in this position in May 2014, Mr. Reis built his career at Groupe Danone, where he held several senior executive positions within Worldwide Operations from 1996 to 2014. Most recently, Mr. Reis served as Managing Director of Groupe Danone South Africa from 2009 until 2014. Mr. Reis worked at Mars Inc. and Bain & Co. in various business roles of increasing responsibility from 1986 to 1996. Mr. Reis holds a Master of Business Administration degree from INSEAD, the University of Manchester and a Bachelor of Science degree with Honors from the University of Manchester.

Esi Eggleston Bracey. Following the closing of the Transactions, Ms. Bracey, 46, will be President, Coty Consumer Beauty and a member of the Coty Executive Committee. In her role, Ms. Bracey will oversee Coty’s Color Cosmetics, Hair Coloring and Styling, and Body Care division. She is currently P&G’s Executive Vice President, Global Color Cosmetics, where she leads CoverGirl and Max Factor businesses across more than 80 global markets. Ms. Bracey has over 24 years of experience, including over 15 years in beauty and personal care. Ms. Bracey holds a Bachelor of Arts degree in Engineering Sciences from Dartmouth College in Hanover, New Hampshire.

Sylvie Moreau. Following the closing of the Transactions, Ms. Moreau, 45, will be President, Coty Professional Beauty and a member of the Coty Executive Committee. In her role, Ms. Moreau will oversee Coty’s salon business in hair and nail care. Ms. Moreau has been with P&G since 1994 and currently serves as Executive Vice President of Wella, the salon professional division of P&G. Ms. Moreau has over 22 years of experience as she held a variety of positions in local, regional and international roles within P&G. Ms. Moreau holds a Master of International Business from NHH Bergen Norway and a MBA from ESSEC Business School of Cergy Pontoise, France.

Certain Relationships and Related Party Transactions

Coty has disclosed information about certain relationships and related transactions in the section entitled “Certain Relationships and Related Party Transactions” of its Annual Report on Form 10-K for the fiscal year ended June 30, 2016 filed on August 18, 2016, which is incorporated by reference in this prospectus. There have been no subsequent material developments to such disclosure.

 

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INFORMATION ON P&G BEAUTY BRANDS

Overview

P&G Beauty Brands is a combination of wholly owned subsidiaries and operations relating to P&G’s global fine fragrances, salon professional, cosmetics and retail hair color businesses, along with select hair styling brands, that, except for the Excluded Brands, will be transferred by P&G and its subsidiaries to Galleria Company as part of the Separation.

P&G Beauty Brands manufactures, markets and sells various branded beauty products including professional and retail hair care, coloring and styling products, fine fragrances and cosmetics. P&G Beauty Brands sells its products in approximately 150 countries primarily through salons, mass merchandisers, grocery stores, drug stores, department stores and distributors.

P&G Beauty Brands includes several global brands, including Clairol Nice ‘n Easy, CoverGirl, HUGO BOSS, Gucci, Lacoste, Max Factor, Wella Koleston and Wella Professional. P&G Beauty Brands was mainly established from P&G’s acquisition of the Noxell Corporation in 1989, the tradename purchase of Max Factor in 1991, the acquisition of Clairol in 2001, the acquisition of Wella AG in September 2003 and other subsequent brand and license acquisitions. As it relates to licenses, P&G Beauty Brands maintains agreements with the owners of the brands, most of which involve the payment of royalties tied to the sales of the underlying brands.

P&G Beauty Brands includes the full line-up of fine fragrance brands as managed by the P&G Fine Fragrance business. The fragrance licenses of Dolce & Gabbana and Christina Aguilera will not transfer in the Transactions. On July 29, 2016, Elizabeth Arden, Inc. acquired the global license for the Christina Aguilera fine fragrance brand from P&G. On June 30, 2016, Dolce & Gabbana and the Shiseido Group announced the signing of a worldwide license agreement for the development, manufacturing and distribution of the Dolce & Gabbana fine fragrance business. P&G will transition out of the Dolce & Gabbana brand license upon the effectiveness of the new Dolce & Gabbana license agreement, which is expected to occur prior to or concurrent with the expected closing of the Transactions (subject to applicable antitrust authorities’ clearance). In addition, P&G Beauty Brands historical results included in this prospectus reflect the results of certain divested P&G Fine Fragrance brands, including Rochas, Laura Biagiotti, Naomi Campbell and Giorgio Beverly Hills, which were divested by P&G in May 2015, June 2015, September 2014 and February 2016, respectively, as well as Puma, which was discontinued in fiscal 2015. Activities related to the Excluded Brands and the Divested Brands collectively accounted for $506 million of P&G Beauty Brands’ net sales and $91 million of P&G Beauty Brands’ net income for the fiscal year ended June 30, 2016. The net income related to the Excluded Brands and the Divested Brands does not reflect a Dolce & Gabbana intangible asset impairment charge of $42 million and a termination fee of $73 million relating to that brand license.

P&G Beauty Brands was historically included within the P&G Beauty reportable segment. P&G Beauty Brands has four operating segments comprised of: (i) Fine Fragrances, (ii) Salon Professional, (iii) Retail Hair Color & Styling and (iv) Cosmetics. Under GAAP, the businesses underlying the four operating segments are aggregated into three reportable segments comprised of: (i) Fine Fragrances, (ii) Salon Professional and (iii) Retail Hair & Cosmetics.

The operating segments are each managed separately based upon product groupings:

 

    Fine Fragrances includes men’s and women’s fine fragrance products across a portfolio of licensed brands.

 

    Salon Professional includes professional hair care, color and styling products.

 

    Cosmetics includes facial, lip, eye and nail color products.

 

    Retail Hair Color & Styling includes retail hair color and styling products.

 

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Below is a summary of P&G Beauty Brands’ brands as of June 30, 2016 across its four operating segments:

 

Fine Fragrances(1)        Salon Professional      

Retail Hair Color &

Styling

      Cosmetics

HUGO BOSS

     Wella Professionals     Wella (and derivatives)     CoverGirl

Gucci

     Sebastian     Londa     Max Factor (excluding

Lacoste

     Nioxin     Londa Trend     Max Factor Gold)

Alexander McQueen

     Clairol Professional     Clairol    

Stella McCartney

     System Professional     Blondor    

James Bond

     Londa Professional     Koleston    

Bruno Banani

     Kadus Professional     Miss Clairol    

Gabriela Sabatini

     Color Charm     Soft Color    

Mexx

     Sassoon Professional**     Natural Instincts    

Escada

         Nice ‘n Easy    

Dolce & Gabbana*

         L’image    

Christina Aguilera*†

         Bellady    
         Balsam Color    
         Shockwaves    
         New Wave Design    
         Silvikrin    
         Wellaton    
         Welloxon    
         VS Salonist**    
         VS Pro-Series Color**    

 

(1) Fine Fragrances brands are licensed to P&G by third parties.
* Denotes Excluded Brand.
** Denotes brand ownership of which will be retained by P&G but to which Coty will be granted a perpetual, royalty-free license.
Acquired by Elizabeth Arden, Inc. on July 29, 2016.

Fine Fragrances

The Fine Fragrances reportable segment represented approximately 36% of P&G Beauty Brands net sales for the fiscal year ended June 30, 2016. Fine Fragrances manufactures, markets and sells fine fragrance products across a portfolio of licensed brands including HUGO BOSS, Dolce & Gabbana, Gucci, Lacoste and Escada, as well as a number of versatile lifestyle brands, including Bruno Banani and James Bond. Fine Fragrances maintains license agreements which have stated expiration dates. Fine Fragrances primarily sells to retail operations, including mass merchandisers, department stores, travel outlets and specialty beauty stores globally, either through the P&G sales force or third-party distributors. Fine Fragrances experiences a degree of seasonality with over 30% of annual sales attributable to the second quarter of the fiscal year due to increased purchases of fragrances during the holiday season.

Fine Fragrances’ headquarters is located in Geneva, Switzerland. Fine Fragrances operates two dedicated manufacturing facilities in Cologne, Germany and Seaton, United Kingdom. In addition to the owned facilities, the Fine Fragrance business utilizes a third-party contract manufacturer in Poissy, France.

Salon Professional

The Salon Professional reportable segment represented approximately 27% of P&G Beauty Brands net sales for the fiscal year ended June 30, 2016. Salon Professional is a manufacturer and supplier of professional hair care products. Salon Professional sells its products primarily to hair salons, professional beauty supply stores and wholesalers serving the professional channel. Salon Professional also supports its customers through training and educational programs. Salon Professional includes several global brands including Wella Professional,

 

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Sebastian, Sassoon Professional, Clairol Professional (also known as Londa Professional or Kadus Professional) and Nioxin. Salon Professional was primarily established through P&G’s acquisition of Wella AG in September 2003 and other subsequent brand purchases. Salon Professional sells products in approximately 110 countries across Europe, North America, Asia, Latin America, the Middle East and Africa through direct selling and indirect selling through distributors.

Salon Professional’s headquarters is located in Geneva, Switzerland. Salon Professional operates in two primary manufacturing facilities in Rothenkirchen, Germany and Huenfeld, Germany. Salon Professional also operates in P&G-shared manufacturing facilities in Mexico, Brazil, Germany and Thailand. In addition to the owned properties, Salon Professional utilizes third-party contract manufacturers primarily for salon appliance and accessory items such as scissors, bowls, capes and towels.

Retail Hair & Cosmetics

The Retail Hair & Cosmetics reportable segment represented approximately 37% of P&G Beauty Brands net sales for the fiscal year ended June 30, 2016. Retail Hair & Cosmetics is a manufacturer and supplier of hair color, styling and cosmetics products. Retail Hair & Cosmetics primarily sells its products to retail operations in approximately 80 countries across North America, Europe, Asia, Latin America, the Middle East and Africa either through direct selling or third-party distributors. Retail Hair Color & Styling includes several global brands including Clairol Nice ‘n Easy, Wella Koleston and Vidal Sassoon. In addition, Retail Hair Color & Styling manages regional or local brands including Soft Color, Wellaton, Natural Instincts, Londa, Miss Clairol, L’image, Bellady, Blondor, Balsam Color, Welloxon, Shockwaves, New Wave, Design, Silvikrin, Wellaflex, Forte, Wella Styling and Wella Trend. Cosmetics includes the CoverGirl and Max Factor brands. CoverGirl is focused in North America. Max Factor is prevalent throughout the rest of the world. Retail Hair Color & Styling was primarily established through P&G’s acquisitions of Clairol in 2001 and Wella in 2003. The CoverGirl business was established through P&G’s acquisition of the Noxell Corporation in 1989. The Max Factor tradename was acquired from Revlon in 1991.

Retail Hair Care & Styling’s business headquarters is located in Geneva, Switzerland. Retail Hair Color & Styling maintains operations in P&G-shared manufacturing facilities in Russia, the United Kingdom, Germany, Mexico, Brazil and Thailand. Cosmetics’ business operations are based in Hunt Valley, Maryland. The Hunt Valley site includes the headquarters, technology center, manufacturing facility and distribution center. A second manufacturing facility is located in Nenagh, Ireland. In addition to the owned facilities, Cosmetics utilizes third-party contract manufacturers for various items, including eye and lip pencils, blushes, eye shadows, brushes and powders.

Trademarks, Licenses, Patents and Other Intellectual Property

P&G Beauty Brands owns or has rights to use a number of trademarks, trade names and other intellectual property, which are of material importance to its business and are protected by registration or otherwise in the United States and most other markets where products are sold.

P&G Beauty Brands’ owned trademarks include Wella, Clairol, CoverGirl and Max Factor. Depending on the jurisdiction, trademarks are generally valid as long as they are in use and/or their registrations are properly maintained and they have not been found to have become generic. Registrations of trademarks can also generally be renewed indefinitely as long as the trademarks are in use.

P&G Beauty Brands is the exclusive worldwide trademark licensee for a number of fragrance brands, including:

 

    HUGO BOSS fragrances, including BOSS Bottled, HUGO Man, HUGO Woman, BOSS Pour Femme and BOSS THE SCENT;

 

    the Gucci fragrances, including Gucci Guilty, Gucci by Gucci, Flora by Gucci and Gucci Bamboo;

 

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    the Lacoste fragrances, including Eau de Lacoste L.12.12, LIVE, Lacoste Pour Femme and Lacoste Essential;

 

    the Escada Fashion fragrances, including Especially Escada, Joyful and Heritage fragrance lines;

 

    the lifestyle fragrance brands of Bruno Banani, Mexx, James Bond, and Gabriela Sabatini;

 

    Stella McCartney fragrances, including Stella;

 

    Alexander McQueen fragrances; and

 

    the Dolce & Gabbana fragrances, including Light Blue, The One, Pour Femme and Pour Homme, Intenso and Dolce and the Velvet Collection line of fragrances, which will not be transferred to Coty in the Transactions.

P&G Beauty Brands existing fragrance licenses impose obligations on it that it believes are common to many licensing relationships in the beauty industry. The licenses impose some or all of the following obligations:

 

    paying annual royalties on net sales of the licensed products;

 

    maintaining the quality of the licensed products and the applicable trademarks;

 

    permitting the licensor’s involvement in and, in some cases, approval of advertising, packaging and marketing plans relating to the licensed products;

 

    maintaining minimum royalty payments and/or minimum sales levels for the licensed products;

 

    actively promoting the sales of the licensed products;

 

    spending a certain amount of net sales on marketing and advertising for the licensed products;

 

    maintaining the integrity of the specified distribution channel for the licensed products;

 

    indemnifying the licensor in the event of product liability or other claims related to the licensed products;

 

    limiting assignment and sub-licensing to third parties without the licensor’s consent; and

 

    in some cases, requiring notice to, or approval by, the licensor of certain changes in control as a condition to continuation of the license.

P&G Beauty Brands is currently in material compliance with all terms of its fragrance license agreements.

A majority of fragrance licenses have renewal options for one or more terms, which can range from two to six years. Certain fragrance licenses provide for extensions at P&G Beauty Brands’ sole discretion, while renewal of others is contingent upon attaining specified sales levels. The next fragrance license scheduled to expire that does not provide for renewal at P&G Beauty Brands’ sole discretion expires in fiscal 2018. One fragrance license which accounted for more than $500 million of Fine Fragrances net sales during fiscal 2016 has a term that expires in fiscal 2021. Coty is in discussions with this licensor to extend the terms of this license. Licenses covering fragrances that accounted for approximately 80% of Fine Fragrances net sales during fiscal 2016 have terms that expire no earlier than fiscal 2021.

P&G Beauty Brands will transfer to Galleria approximately 2,600 patents and patent applications worldwide, and the patent portfolio as a whole is material to its business. However, no one patent is material to P&G Beauty Brands. Following the Transactions, P&G will license to Coty and Galleria approximately 660 patents and patent applications. In addition, P&G Beauty Brands has proprietary trade secrets, technology, know-how processes and other intellectual property rights that are not registered.

 

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Sales, Distribution and Marketing

P&G Beauty Brands sells its Fine Fragrances products through a combination of its own direct sales force and distributor partners. In markets where P&G Beauty Brands has a significant and established presence, a direct sales model is employed, leveraging a full multifunctional team on the ground. For smaller, developing markets that have not yet reached critical mass, P&G Beauty Brands sells its Fine Fragrances products using a distributor model operated through closely held relationships with the company headquarters in Geneva. For markets that are in a rapid expansion phase, a hybrid approach that combines both a direct and a distributor go-to-market strategy may be used.

P&G Beauty Brands sells its Salon Professional products through a combination of direct selling and indirect selling through distributors. Salon Professional extends loans to certain customers to help finance salon openings, renovations and other improvements. In exchange for this financing, customers become contractually obligated to purchase products from Salon Professional with common terms of three to five years. Certain customer loans may be provided at favorable rates, including interest-free or with below market interest rates that typically range from 1% to 5%. Payments are received either in the form of scheduled cash payments or through a partial or complete offset against rebates or other allowances earned from product purchases.

P&G Beauty Brands sells its Cosmetics products through a combination of direct selling and indirect selling through distributors. Cosmetics has two primary distribution facilities: the Riverside facility in Belcamp, Maryland and a facility in Bournemouth, England. Through the Riverside facility, P&G Beauty Brands manages the CoverGirl business for North America and certain international markets. Through the Bournemouth facility, P&G Beauty Brands manages the Max Factor business and, more recently, a portion of the CoverGirl business. The Bournemouth facility serves more than 75 countries worldwide.

P&G Beauty Brands sells its Retail Hair Care and Color products through a combination of direct selling and indirect selling through distributors.

P&G Beauty Brands’ marketing and advertising campaigns are designed to drive brand awareness and brand equity. Advertising costs include television, print, radio, internet and in-store advertising. Advertising expense was $958 million in fiscal 2016, $1.080 billion in fiscal 2015 and $1.096 billion in fiscal 2014. Non-advertising components of the marketing spending include costs associated with consumer promotions, product sampling, sales aids, coupons and customer trade funds.

Property

Information regarding the production plans and distribution facilities used by P&G Beauty Brands is provided below. Except as otherwise indicated, P&G Beauty Brands’ title and/or rights in these properties will be transferred to Galleria Company in the Separation.

Production Plants

P&G Beauty Brands currently operates ten owned or leased production plants. P&G Beauty Brands’ management believes the facilities are in good condition, well maintained and sufficient for its present operations. In addition, P&G Beauty Brands products are also manufactured at facilities operated by production partners in Austria, Canada, China, Czech Republic, France, Germany, Hong Kong, Italy, Japan, Lebanon, Mexico, Poland, South Korea, Switzerland, the United Kingdom and the United States. The production plants are segmented by product line, although some cross-production and distribution does occur.

 

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The following is a list of the primary production plants used by P&G Beauty Brands:

 

Property Name

   Location    Owned/Leased   

Product

   Square Footage

Seaton Delaval Plant

   Seaton Delaval,
England
   Owned   

Gucci, Dolce &

Gabbana, HUGO

BOSS, Lacoste,

Escada and Stella

McCartney fragrances

   329,591

Cologne Plant

   Cologne, Germany    Owned   

Dolce & Gabbana,

James Bond, Bruno

Banani, Mexx,

Christina Aguilera and

Gabriela Sabatini

fragrances

   635,264

Rothenkirchen Plant

   Rothenkirchen,
Germany
   Owned    Color products    228,808

Huenfeld Plant

   Huenfeld, Germany    Owned    Aerosol, shampoo and conditioner products    507,325

Capella Plant

   Dzerzhinsk, Russia    Owned    Color    124,016

Bangkok Plant

   Bangkok, Thailand    Owned   

Color, perm and

shampoo products and conditioner packing

   713,916

Mariscala Plant

   Mariscala, Mexico    Owned    Color products    1,600,000

Hunt Valley Plant and Beaver Court Building

   Cockeysville,
Maryland
   Owned    CoverGirl products    1,069,685 and
415,037,
respectively

Nenagh Plant

   Nenagh, Ireland    Owned    Max Factor products    204,746

Distribution Facilities

P&G Beauty Brands also uses a number of office and warehouse facilities for product distribution. The following is a list of the primary office and warehouse facilities owned and leased by P&G Beauty Brands for product distribution:

 

Property Name

   Location    Owned/Leased    Use    Square Footage

Mariscala

   Mariscala, Mexico    Owned    Distribution center    Included in
Mariscala Plant

Weiterstadt

   Weiterstadt,
Germany
   Owned    Distribution center    348,000

Riverside

   Belcamp, Maryland    Leased    Distribution center    800,797

Bournemouth

   Bournemouth,
England
   Owned    Distribution center    226,797

Basingstoke

   Basingstoke, England    Leased    Distribution center    58,252

Woodland Hills

   Woodland Hills,
California
   Leased    Salon Professional
office
   95,908

New York City

   New York City, New
York
   Leased    Fine Fragrances office    48,007

Ontario

   Ontario, California    Leased    Distribution center    64,000

Mississauga

   Mississauga, Canada    Leased    Office    49,987

Rio de Janeiro

   Rio de Janeiro, Brazil    Leased    Distribution center    33,392

 

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In addition to these primary office and warehouse facilities, P&G Beauty Brands operates other offices and warehouse facilities to manufacture, market and sell various branded beauty products in approximately 150 countries. Each of these facilities, to the extent primarily related to Galleria, will be transferred to Galleria Company in the Separation.

Customers

P&G Beauty Brands sells its products in approximately 150 countries primarily through salons, mass merchandisers, grocery stores, drug stores, department stores and distributors. For the fiscal year ended June 30, 2016, P&G Beauty Brands had no customer that represents more than 10% of net sales.

Research and Development

The principal research and development facilities of P&G Beauty Brands are located in Cincinnati, Ohio; Hunt Valley, Maryland; Frankfurt, Germany; and London, England. Research and development resources are focused on the design of new products, consumer testing and the implementation of new products into production. The research and development organization is also responsible for implementing savings programs to reduce costs of packaging and raw materials. The research and development organization is composed of four main groups with the following responsibilities:

 

    Product Research—consumer studies and testing;

 

    Formula Design—development of product formulations;

 

    Process Development—application of new products on the production lines; and

 

    Packaging—packaging-related developments including sizes and material design.

Research and development expenditures were $80 million, $56 million and $74 million for the fiscal years ended June 30, 2016, 2015 and 2014, respectively.

Competition

P&G Beauty Brands is subject to competitive conditions in all four operating segments of its business. The beauty industry is highly competitive and can change rapidly due to consumer preferences and industry trends. Competition in the beauty industry is based on brand strength, pricing and assortment of products, in-store presence and visibility, innovation, perceived value, product availability, order fulfillment, service to the customer, promotional activities, advertising, special events, new product introductions and other activities.

Fine Fragrances competes with a large set of brands including global players such as Chanel, Dior and Armani as well as a multitude of regional and local brands. Competition is primarily on the basis of brand recognition, innovation, marketing and price. Main competitors such as L’Oréal, Estée Lauder and LVMH operate with a licensing model comparable to P&G Beauty Brands. Barriers to entry can be considered low as product technology is readily available through contract manufacturers and well-developed distributors can be leveraged in all key markets. Substantial advertising and promotional expenditures are required to maintain or improve a brand’s market position or to introduce a new product.

Salon Professional primarily competes with L’Oréal and Henkel. Competition is primarily on the basis of product quality, brand recognition, brand loyalty, service, marketing and education of salon owners and stylists. Substantial advertising and promotional expenditures are required to maintain or improve a brand’s market position or to introduce a new product.

Cosmetics primarily competes with L’Oréal, Maybelline and Revlon. Competition is primarily on the basis of advertising, packaging, quality and brand recognition. Substantial advertising and promotional expenditures are required to maintain or improve a brand’s market position or to introduce a new product.

 

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Retail Hair Color & Styling primarily competes with L’Oréal and Henkel. Competition is primarily on the basis of product quality, brand recognition, brand loyalty, service and marketing. Substantial advertising and promotional expenditures are required to maintain or improve a brand’s market position or to introduce a new product.

Employees

As of June 30, 2016, P&G Beauty Brands employed approximately 9,876 people, approximately 9,804 of whom will be transferred with Galleria. The majority of these employees are located in Germany, the United Kingdom, the United States, Switzerland, Spain, France, Russia and Mexico. Other than employees who are represented by works’ councils outside of the United States, the only employees represented by a labor union are employees in Ireland, Thailand, Italy, Greece and Sweden. P&G Beauty Brands believes that relations with its employees are good.

Seasonality

Demand for products in Fine Fragrances is seasonal, with higher sales generally occurring in the first half of the fiscal year as a result of increased demand by retailers in anticipation of and during the holiday season. Working capital requirements, sales and cash flows generally experience variability during the three to six months preceding the holiday period due, in part, to product innovations and new product launches and the size and timing of certain orders from customers.

Sales of products in the Salon Professional, Cosmetics and Retail Hair Color & Styling operating segment are generally evenly balanced throughout the year. Increased sales of hair care and cosmetic products relative to fragrances may reduce the seasonality of P&G Beauty Brands’ business.

Government Regulation

As a producer and marketer of fragrances, cosmetics and hair care items, P&G Beauty Brands’ operations are subject to regulation by various governmental agencies, including the U.S. Food and Drug Administration, the Federal Trade Commission, the U.S. Environmental Protection Agency, the U.S. Department of Labor, and the U.S. Department of Commerce, as well as various state agencies, with respect to production processes, product quality, packaging, labeling, storage and distribution. Under various statutes and regulations, these agencies prescribe requirements and establish standards for safety and labeling. Other agencies and bodies outside of the United States, including those of the European Union and various countries, states and municipalities, also regulate P&G Beauty Brands’ businesses. Failure to comply with one or more regulatory requirements can result in a variety of sanctions, including monetary fines or compulsory withdrawal of products from store shelves.

Advertising of P&G Beauty Brands’ products is subject to regulation by the Federal Trade Commission and various state laws, and P&G Beauty Brands is subject to certain health and safety regulations, including those issued under the Occupational Safety and Health Act.

P&G Beauty Brands believes that it is in compliance in all material respects with all such laws and regulations and that it has obtained all material licenses and permits that are required for the operation of its business. P&G Beauty Brands is not aware of any environmental regulations that have or that it believes will have a material adverse effect on its operations.

Legal Proceedings

P&G Beauty Brands is the subject of various pending or threatened legal actions in the ordinary course of its business. All such matters are subject to many uncertainties and outcomes that are not predictable with assurance. In the opinion of P&G Beauty Brands management, there were no claims or litigation pending as of June 30, 2016, that were reasonably likely to have a material adverse effect on P&G Beauty Brands’ financial position or results of operations.

 

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BUSINESS STRATEGIES AFTER THE TRANSACTIONS

Coty’s strategic vision is to be a new global leader and challenger in the beauty industry. After the completion of the Transactions, Coty intends to reorganize its business into three new divisions: Coty Luxury Division, focused on fragrances and skin care; Coty Consumer Beauty Division, focused on color cosmetics, retail hair coloring and styling products and body care; and Coty Professional Beauty Division, focused on servicing salon owners and professionals in both hair and nail care. This new category-focused organizational structure puts consumers first by specifically targeting how and where they shop, and what and why they purchase. In this new organizational structure, each division will have full end-to-end responsibility to optimize consumers’ beauty experience in the relevant categories and channels, which Coty believes will drive profitable growth through targeted expertise.

The chart below reflects the expected allocation of the combined company brands across Coty’s new divisions:

 

 

LOGO

Coty’s key business strategies following the Transactions will be to:

 

    Leverage the Strength and Scale of the Combined Company to Create a New Global Leader and Challenger in the Beauty Industry. Coty expects that the Transactions will create one of the world’s largest pure-play beauty companies, with pro forma combined annual revenues of approximately $9.2 billion based on fiscal year 2015 performance, excluding annualized results for the acquired Bourjois brand and Hypermarcas Beauty Business.

 

    Expand in Attractive New Category, Through the Addition of the Hair Color and Styling Business. Following the Transactions, Coty will expand its product offering with the addition of the Galleria hair color and styling business, led by the Wella and Clairol brands. The combined business will have a balanced portfolio across four product categories, each with a top three global position based on pro forma net sales.

 

    Combine New Organic Growth Opportunities with a Well-Targeted Acquisition Strategy. Coty was founded in 1904 as a revolutionary mass fragrance company and over the last three decades has successfully completed a number of acquisitions to drive product, geographic and distribution platform diversity and growth. Coty will leverage further organic growth opportunities presented by the Transactions, and is continuously evaluating and will continue to evaluate potential acquisitions that would augment its portfolio going forward and further its progression towards becoming a global leader in beauty.

 

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    Drive Improvements in Margin, Profit and Free Cash Flow, Providing Financial Flexibility. Coty expects that after the Transactions, the combined operational and financial platform will allow Coty to drive meaningful earnings per share accretion and substantial incremental free cash flow generation, providing financial flexibility for the company. In August 2016, Coty’s Board of Directors approved a 10% increase in Coty’s annual dividend to $0.275 from $0.25 per share on its Coty common stock and Coty class B common stock. Coty intends to further increase the annual dividend per share to $0.50 after completion of the Transactions, demonstrating Coty’s confidence in its ability to generate substantial cash flow.

 

    Capitalize on Strong, Well-Aligned and Balanced Leadership Team. Following the Transactions, Coty’s new CEO, Camillo Pane, will oversee a management team, together with a broader leadership organization, consisting of executives from both businesses as well as key external hires.

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF P&G BEAUTY BRANDS

The following discussion and analysis is intended to provide investors with an understanding of the historical performance of P&G Beauty Brands and its financial condition. This discussion and analysis presents the factors that had a material effect on the results of operations of P&G Beauty Brands for the fiscal years ended June 30, 2016, 2015 and 2014.

The financial statements of P&G Beauty Brands have been derived from P&G’s historical accounting records and reflect significant allocations of direct costs and expenses. All of the allocations and estimates in these financial statements are based on assumptions that P&G management believes are reasonable and have been consistently applied to all periods. However, the financial statements do not necessarily represent the financial results or position of P&G Beauty Brands that would have been achieved had it been operated as a separate independent entity.

For further descriptions of P&G Beauty Brands and the underlying basis of presentation, see the footnotes to P&G Beauty Brands’ audited combined financial statements, in particular Notes 1 and 2, included elsewhere in this prospectus. You should read this discussion in conjunction with the historical combined financial statements of P&G Beauty Brands.

The following discussion and analysis contains forward-looking statements. See “Cautionary Statement on Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions associated with these statements.

Overview

P&G Beauty Brands manufactures, markets and sells various branded beauty products including professional and retail hair care, hair coloring and styling products, fine fragrances and cosmetics. P&G Beauty Brands sells its products in approximately 150 countries primarily through salons, mass merchandisers, grocery stores, drug stores, department stores and distributors.

P&G Beauty Brands has four operating segments comprised of: (1) Fine Fragrances, (2) Salon Professional, (3) Retail Hair Color & Styling and (4) Cosmetics. Under GAAP, the businesses underlying the four operating segments are aggregated into three reportable segments, described in the following table:

 

Reportable Segment

  

% of P&G Beauty

Brands Net Sales

in Fiscal 2016

  

Description

  

Key Brands

Fine Fragrances

   36%    Men’s and women’s fine fragrance products across a portfolio of licensed brands    HUGO BOSS, Gucci, Lacoste, Escada, Dolce & Gabbana

Salon Professional

   27%    Professional hair care, color and styling products    Wella, Sebastian, Nioxin, Clairol

Retail Hair & Cosmetics

   37%    Retail Hair Color & Styling (hair color and styling products) and Cosmetics (facial, lip and eye cosmetics and nail color products)    Clairol, Koleston, Vidal Sassoon, Max Factor, CoverGirl

 

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Segment results reflect information on the same basis used for internal management reporting and performance evaluation. The results of these reportable segments exclude certain costs not attributable to a specific segment such as interest expense, investing activities, certain restructuring and transition costs and gains and losses of certain divested brands. These impacts are reported in Corporate and are included as part of the Corporate discussion. Additionally, as described in Note 14 to P&G Beauty Brands’ audited combined financial statements, blended statutory tax rates are applied in the segments. Eliminations to adjust segment results to arrive at the effective tax rate are included in Corporate.

Throughout this Management’s Discussion and Analysis, references are made to business results in developed markets, which are comprised of Western Europe, the United States, Canada and Japan, and developing markets, which are all other markets not included in developed markets. Reference is also made to productivity efforts and manufacturing cost savings as drivers of reduced overhead spending and gross margin benefits, respectively. For further descriptions of these programs, see Note 7 to P&G Beauty Brands’ audited combined financial statements.

Impact of the Distribution from P&G on P&G Beauty Brands’ Financial Statements

Until the Distribution, P&G performed and will continue to perform significant corporate and operational functions for P&G Beauty Brands, as well as for its other businesses. P&G Beauty Brands’ combined financial statements reflect an allocation of these costs. Expenses allocated to P&G Beauty Brands include costs related to human resources, legal, treasury, accounting, information technology, internal audit and other similar services. Following the Distribution, expenses incurred by Coty to replace some of these functions may differ from P&G Beauty Brands’ historically allocated expense levels.

In addition, following the Distribution and completion of the Transactions, P&G has agreed to provide limited transition services to Coty, while Galleria is being integrated into Coty. These services will be provided for a limited period of time after the completion of the Transactions pursuant to the Transition Services Agreement. See “Additional Agreements—Transition Services Agreement.”

Certain Trends and Other Factors Affecting P&G Beauty Brands

Global Economic Conditions. Current macroeconomic factors remain dynamic, and any causes of market size contraction, such as reduced gross domestic product in commodity-dependent economies as commodity prices decline, greater political unrest in the Middle East and Eastern Europe, further economic instability in the European Union, political instability in certain Latin American markets and economic slowdowns in Japan and China, could reduce P&G Beauty Brands’ sales or erode its operating margin, in either case reducing its earnings.

Changes in Costs. P&G Beauty Brands’ costs are subject to fluctuations, particularly due to changes in its own productivity efforts. P&G Beauty Brands strives to implement, achieve and sustain cost improvement plans, including outsourcing projects, supply chain optimization and general overhead and workforce optimization. If P&G Beauty Brands is unsuccessful in executing these changes, there could be a negative impact on its operating margin and net earnings.

Foreign Exchange. P&G Beauty Brands had both translation and transaction exposure to the fluctuation of exchange rates. Translation exposures relate to exchange rate impacts of measuring income statements of foreign subsidiaries that do not use the U.S. dollar as their functional currency. Transaction exposures relate to (1) the impact from input costs that are denominated in a currency other than the local reporting currency and (2) the revaluation of transaction-related working capital balances denominated in currencies other than the functional currency. In 2016, 2015 and 2014, the U.S. dollar strengthened versus a number of foreign currencies leading to lower sales and earnings from these foreign exchange impacts. Certain countries experiencing significant exchange rate fluctuations, such as Brazil, Canada, Mexico, Russia and Turkey, have had, and could continue to have, an additional significant impact on P&G Beauty Brands’ sales, costs and earnings. Increased pricing in response to these fluctuations in foreign currency exchange rates may offset portions of the currency impacts, but could also have a negative impact on consumption of P&G Beauty Brands’ products, which would affect its sales.

 

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Government Policies. P&G Beauty Brands’ net earnings could be affected by changes in U.S. or foreign government tax policies. For example, the United States is considering corporate tax reform that may significantly impact the corporate tax rate and change the U.S. tax treatment of international earnings. Changes in government policies in these areas might cause an increase or decrease in P&G Beauty Brands’ sales, operating margin and net earnings.

For information on risk factors that could impact P&G Beauty Brands’ results, refer to “Risk Factors.”

Significant Accounting Policies and Estimates

In preparing P&G Beauty Brands’ combined financial statements in accordance with GAAP, there are certain accounting policies that may require substantial judgment or estimation in their application. These significant accounting policies, and others, are discussed in Note 3 to P&G Beauty Brands’ audited combined financial statements included elsewhere in this prospectus, and should be reviewed as they are integral to understanding the results of operations and financial condition of P&G Beauty Brands. Due to the nature of P&G Beauty Brands’ business, estimates generally are not considered highly uncertain at the time of the estimation, as they are not expected to result in changes that would materially affect P&G Beauty Brands’ results of operations or financial condition in any given year.

Income Taxes

P&G Beauty Brands is included in P&G’s consolidated tax returns in various jurisdictions and accounts for income taxes under the separate return method. Under this approach, P&G Beauty Brands determines its income tax expense, tax liability and deferred tax assets and liabilities as if it were filing separate tax returns.

The annual tax rate is determined based on income, statutory tax rates and the tax impacts of items treated differently for tax purposes than for financial reporting purposes. Also inherent in determining the annual tax rate are judgments and assumptions regarding the recoverability of certain deferred tax balances, primarily net operating loss and other carryforwards, and the ability to uphold certain tax positions.

Realization of deferred taxes related to net operating losses and other carryforwards is dependent upon generating sufficient taxable income in the appropriate jurisdiction prior to the expiration of the carryforward periods, which involves business plans, planning opportunities and expectations about future outcomes. Although realization is not assured, P&G Beauty Brands believes it is more likely than not that deferred tax assets, net of valuation allowances, will be realized. However, P&G Beauty Brands’ net operating loss carryforwards may not be transferred in certain transactions.

As a part of P&G’s operations, P&G Beauty Brands operates in multiple jurisdictions with complex tax policy and regulatory environments. In certain of these jurisdictions, P&G may take tax positions that management believes are supportable, but are potentially subject to successful challenge by the applicable taxing authority. These interpretational differences with the respective governmental taxing authorities can be impacted by the local economic and fiscal environment. P&G is subject to audit in many of these jurisdictions. Although none of the audits are specific to P&G Beauty Brands, the scope of the P&G audits would include P&G Beauty Brands’ activities. P&G evaluates its uncertain tax positions and establishes liabilities in accordance with the applicable accounting guidance. P&G reviews these tax uncertainties in light of changing facts and circumstances, such as the progress of tax audits, and adjusts them accordingly. Although the resolution of these tax positions is uncertain, based on currently available information, P&G believes that the ultimate outcomes will not have a material adverse effect on the financial position, results of operations or cash flows of P&G Beauty Brands.

Because there are a number of estimates and assumptions inherent in calculating the various components of P&G Beauty Brands’ tax provision, certain changes or future events such as changes in tax legislation, geographic mix of earnings, completion of tax audits or earnings repatriation plans could have an impact on those estimates and the effective tax rate. For additional details on P&G Beauty Brands’ income taxes, see Note 10 to P&G Beauty Brands’ audited combined financial statements.

 

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Goodwill and Intangible Assets

Significant judgment is required to estimate the fair value of intangible assets and in assigning their respective useful lives. P&G Beauty Brands’ goodwill represents a combination of goodwill directly attributable to the business as well as a portion of allocated goodwill from P&G that has been pushed down to P&G Beauty Brands utilizing the relative fair value of P&G Beauty Brands as compared to P&G’s various reporting units’ goodwill. For business acquisitions, P&G typically obtains the assistance of third-party valuation specialists for evaluating significant tangible and intangible assets. The fair value estimates are based on available historical information and on future expectations and assumptions deemed reasonable by management, but are inherently uncertain.

P&G typically uses an income method to estimate the fair value of intangible assets, which is based on forecasts of the expected future cash flows attributable to the respective assets. Significant estimates and assumptions inherent in the valuations reflect a consideration of other marketplace participants, and include the amount and timing of future cash flows (including expected growth rates and profitability), the underlying product or technology life cycles, economic barriers to entry, a brand’s relative market position and the discount rate applied to the cash flows. Unanticipated market or macroeconomic events and circumstances may occur, which could affect the accuracy or validity of the estimates and assumptions.

Determining the useful life of an intangible asset also requires judgment. Certain brand intangible assets are expected to have indefinite lives based on their history and plans to continue to support and build the acquired brands. Other acquired intangible assets (e.g., certain trademarks or brands, customer relationships, patents and technologies) are expected to have determinable useful lives. Assessment as to brands that have an indefinite life and those that have a determinable life is based on a number of factors including competitive environment, market share, brand history, underlying product life cycles, operating plans and the macroeconomic environment of the countries in which the brands are sold. Estimates of the useful lives of determinable-lived intangible assets are primarily based on these same factors. All acquired technology and customer-related intangible assets are expected to have determinable useful lives.

The costs of determinable-lived intangible assets are amortized to expense over their estimated useful lives. The value of indefinite-lived intangible assets and residual goodwill is not amortized, but is tested at least annually for impairment. Impairment testing for goodwill is performed separately from impairment testing of indefinite-lived intangible assets. P&G tests goodwill for impairment by reviewing the book value compared to the fair value at the reporting unit level. P&G tests individual indefinite-lived intangible assets by comparing the book values of each asset to the estimated fair value. P&G determines the fair value of reporting units and indefinite-lived intangible assets based on the income approach. Under the income approach, P&G calculates the fair value of reporting units and indefinite-lived intangible assets based on the present value of estimated future cash flows. Considerable management judgment is necessary to evaluate the impact of operating and macroeconomic changes and to estimate future cash flows to measure fair value. Assumptions used in impairment evaluations, such as forecasted growth rates and cost of capital, are consistent with internal projections and operating plans. P&G believes such assumptions and estimates are also comparable to those that would be used by other marketplace participants.

The reportable segment valuations used to test goodwill and intangible assets for impairment are dependent on a number of significant estimates and assumptions, including macroeconomic conditions, overall category growth rates, competitive activities, cost containment and margin expansion and business plans. P&G believes these estimates and assumptions are reasonable. Changes to or a failure to achieve these business plans or a further deterioration of the macroeconomic conditions could result in a valuation that would trigger an additional impairment of the goodwill and intangible assets of these businesses. See Note 5 to P&G Beauty Brands’ audited combined financial statements for additional details.

 

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Results of Operations

P&G Beauty Brands’ fiscal year begins on July 1 and ends on the following June 30. For example, “fiscal 2016” began on July 1, 2015 and ended on June 30, 2016.

The following table presents information about P&G Beauty Brands’ results of operations, in dollar terms and expressed as a percentage of net sales, for the fiscal years 2016, 2015 and 2014:

 

(Dollars in millions, percents as a % of net sales)

  Fiscal Years Ended June 30  
  2016     2015     2014  

Net sales

  $ 4,911        100   $ 5,518        100   $ 6,003        100

Cost of products sold

    1,662        33.8     1,875        34.0     2,029        33.8
 

 

 

     

 

 

     

 

 

   

Gross profit

    3,249        66.2     3,643        66.0     3,974        66.2

Selling, general and administrative expense

    3,013        61.4     3,229        58.5     3,515        58.6

Goodwill and indefinite-lived intangible asset impairment charges

    48        1.0                      
 

 

 

     

 

 

     

 

 

   

Operating income

    188        3.8     414        7.5     459        7.6

Interest expense/(income), net

    29        0.6     (1         (2    

Other non-operating income, net

    8        0.2     94        1.7           

Income taxes

    101        2.1     361        6.5     152        2.5
 

 

 

     

 

 

     

 

 

   

Net earnings

  $ 66        1.3   $ 148        2.7   $ 309        5.2
 

 

 

     

 

 

     

 

 

   

P&G Beauty Brands is a combination of wholly owned subsidiaries, including Galleria Company and operations of the Fine Fragrances, Salon Professional, Retail Hair Color & Styling and Cosmetics businesses of P&G. The Fine Fragrances reportable segment includes results of operations of the Divested Brands, which include Giorgio Beverly Hills, which was divested in February 2016, Laura Biagiotti, which was divested in June 2015, Rochas, which was divested in May 2015, Naomi Campbell, which was divested in September 2014, and Puma, which was discontinued in fiscal 2015, along with the results of operations of the Excluded Brands, which include Dolce & Gabbana and Christina Aguilera. The Dolce & Gabbana and Christina Aguilera licenses were excluded from the Transactions because the licensors did not provide their consent to the transfer of the licenses as part of the Transactions within the specified timetable. In accordance with the Transaction Agreement and in the interest of closing the Transactions in the agreed-upon time frame, P&G and Coty agreed that these brands would not transfer. The business drivers for the change in sales and operating results of the Excluded Brands and Divested Brands were generally similar to those of the overall Fine Fragrances segment.

Fiscal 2016 Compared to Fiscal 2015

Net Sales

The following tables summarizes P&G Beauty Brands’ combined net sales and net sales by reportable segment for fiscal 2016 and 2015.

 

     Fiscal Years Ended June 30     

 

 
(Dollars in millions)        2016              2015          Percent Change  

Fine Fragrances

   $ 1,749       $ 1,993         (12 )% 

Salon Professional

     1,336         1,406         (5 )% 

Retail Hair & Cosmetics

     1,826         2,119         (14 )% 
  

 

 

    

 

 

    

Total net sales

   $ 4,911       $ 5,518         (11 )% 
  

 

 

    

 

 

    

 

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     Net Sales Change Drivers 2016 vs. 2015 (Fiscal Years Ended June 30)*  
     Volume      Foreign
Exchange
     Price**      Mix      Net Sales
Growth
 

Fine Fragrances

       (9)%             (7)%             3%             1%           (12)%   

Salon Professional

     1%         (8)%         3%         (1)%         (5)%   

Retail Hair & Cosmetics

     (11)%         (7)%         2%         2%         (14)%   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     (8)%         (7)%         3%         1%         (11)%   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

* Net sales percentage changes are approximations based on quantitative formulas that are consistently applied.
** Price changes reflect the combined impact of list price changes and changes in trade promotion spending.

P&G Beauty Brands. P&G Beauty Brands net sales for fiscal 2016 decreased 11% to $4.9 billion compared to fiscal 2015. Volume decreased 8% due to a double-digit decline in Retail Hair & Cosmetics and a high-single-digit decline in Fine Fragrances, partially offset by low single-digit growth in Salon Professional. Unfavorable foreign exchange reduced net sales by 7% while increased pricing across all segments increased net sales by 3%. Favorable mix added 1% to net sales due to an increase in the relative proportion of Salon Professional volume which has higher than average selling prices, as well as geographic mix across the segments due to the disproportionate decline of developing markets, which generally have lower than average selling prices.

Fine Fragrances. Fine Fragrances net sales decreased $244 million, or 12%, to $1.7 billion for fiscal 2016 compared to fiscal 2015. Of this decrease, approximately $80 million was associated with the Excluded Brands, which declined 14% from approximately $590 million in the prior year to approximately $510 million for fiscal 2016, and approximately $80 million was associated with Divested Brands, which had no net sales in the current period. Fine Fragrances volume decreased 9%, including a 4% impact driven by brand divestitures (primarily Rochas, Laura Biagiotti and Naomi Campbell). Volume declined in certain developed markets due to a decline in market share, which decreased due to competitive activity. Volume also declined in distributor markets in developing regions (mainly Latin America, Africa and the Middle East) behind macroeconomic uncertainty, competitive activity and weakening foreign exchange that drove lower in-market consumption, primarily for the Dolce & Gabbana brand. Unfavorable foreign exchange reduced net sales by 7% while pricing added 3% to net sales. Favorable mix increased sales by 1% due to a disproportionate decline of volume in developing markets which have lower than segment-average selling prices.

Salon Professional. Salon Professional net sales decreased 5% to $1.3 billion for fiscal 2016 compared to fiscal 2015 on volume growth of 1%. Volume increased due to increased distribution in developed markets, primarily North America, and product innovation. Unfavorable foreign exchange reduced net sales by 8% while higher pricing increased net sales 3%. Unfavorable geographic mix reduced net sales 1% as North America, which drove the volume increases, has lower than segment-average selling prices for this segment.

Retail Hair & Cosmetics. Retail Hair & Cosmetics net sales declined 14% to $1.8 billion for fiscal 2016 compared to fiscal 2015 on volume decline of 11%. Volume decreased double digits in Retail Hair & Styling due to market contraction in the regions where P&G Beauty Brands competes, base period volume pull-forward in advance of tax-related price increases in Brazil, competitive activity and following increased pricing to recover currency devaluation impacts. Volume decreased mid-single digits in Cosmetics, due to competitive activity, in particular in developed markets, and consumption decline following currency-driven price increases. Unfavorable foreign exchange reduced net sales by 7%. Price increases added 2% to net sales while favorable geographic mix increased net sales by 2% due to a disproportionate volume decline in developing markets which have lower than segment-average selling prices.

 

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Operating Costs and Income

The following tables summarize P&G Beauty Brands’ combined operating income/(loss) and other measures by reportable segment for fiscal 2016 and 2015.

 

     Fiscal Years Ended June 30  
     Gross Margin     SG&A Expenses     SG&A as a % of Net
Sales
 
(Dollars in millions)        2016             2015         2016      2015      % Change         2016             2015      

Fine Fragrances

     70.3     68.8   $ 1,194       $ 1,367         (13 )%      68.3     68.6

Salon Professional

     67.7     68.5     814         884         (8 )%      60.9     62.9

Retail Hair & Cosmetics

     63.0     62.3     856         908         (6 )%      46.9     42.9

Corporate

     N/A        N/A        149         70         113     N/A        N/A   
      

 

 

    

 

 

        

Total

     66.2     66.0   $ 3,013       $ 3,229         (7 )%      61.4     58.5
      

 

 

    

 

 

        

 

     Fiscal Years Ended June 30  
     Operating Income / (Loss)     Operating Margin  
(Dollars in millions)    2016     2015     % Change         2016             2015      

Fine Fragrances

   $ 36      $ 5        620     2.1     0.3

Salon Professional

     90        79        14     6.7     5.6

Retail Hair & Cosmetics

     294        413        (29 )%      16.1     19.5

Corporate

     (232     (83     N/A        N/A        N/A   
  

 

 

   

 

 

       

Total

   $ 188      $ 414        (55 )%      3.8     7.5
  

 

 

   

 

 

       

P&G Beauty Brands. P&G Beauty Brands operating income decreased 55% to $188 million for fiscal 2016 compared to fiscal 2015, as a result of the decrease in net sales discussed above along with operating margin contraction, which decreased 370 basis points to 3.8%, partially driven by negative foreign exchange impacts.

P&G Beauty Brands gross margin increased 20 basis points to 66.2% for fiscal 2016 compared to fiscal 2015. The increase was primarily the result of pricing benefits and manufacturing cost savings partially offset by unfavorable mix, mainly driven by product mix in the Salon Professional and Fine Fragrances segments.

P&G Beauty Brands selling, general and administrative expense (“SG&A”) declined 7% to $3.0 billion for fiscal 2016 compared to $3.2 billion for fiscal 2015 as the result of reductions in marketing spending and overhead costs, both due to a focus on productivity efforts, and currency impacts partially offset by an increase in other operating expenses due to a termination fee associated with the Dolce & Gabbana license (see Note 13 to P&G Beauty Brands’ audited combined financial statements). SG&A as a percentage of P&G Beauty Brands net sales increased 290 basis points to 61.4% for fiscal 2016 due to the aforementioned termination fee and the negative scale impacts of the reduction in net sales.

In connection with the decision to exclude the Dolce & Gabbana and Christina Aguilera fine fragrance licenses from the Transactions, P&G Beauty Brands recorded a non-cash, before-tax impairment charge in fiscal 2016 of $48 million ($42 million after-tax) in order to record the Dolce & Gabbana license intangible asset at its revised estimated net realizable value (see Note 5 to P&G Beauty Brands’ audited combined financial statements). This intangible asset impairment charge had a negative 100 basis point impact on P&G Beauty Brands operating margin compared to fiscal 2015.

Fine Fragrances. Fine Fragrances operating income increased more than six-fold to $36 million for fiscal 2016 compared to a nominal base period in fiscal 2015 as lower net sales were more than offset by an increase in operating margin. Operating margin improved 180 basis points to 2.1% for fiscal 2016 driven by both higher gross margin and lower SG&A as a percentage of net sales.

 

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Fine Fragrance gross margin increased 150 basis points to 70.3% for fiscal 2016 compared to fiscal 2015. The increase was a result of pricing benefits and manufacturing cost savings partially offset by unfavorable product mix due to an increase in lower margin holiday gift packs and a disproportionate volume decline in higher margin brands such as Lacoste.

Fine Fragrances SG&A spending declined 13% to $1.2 billion in fiscal 2016 from $1.4 billion in fiscal 2015 primarily due to currency impacts and reduced marketing and overhead costs resulting from a focus on productivity. Fine Fragrances SG&A as a percentage of net sales decreased 30 basis points to 68.3% as the reduction in SG&A spending was partially offset by the negative scale impact of the reduction in net sales.

Salon Professional. Salon Professional operating income increased 14% to $90 million for fiscal 2016 compared to fiscal 2015 as a result of a 110 basis point increase in operating margin, partially offset by the reduction in net sales. Operating margin increased to 6.7% for fiscal 2016 driven by lower SG&A as a percentage of net sales, partially offset by reduced gross margin.

Salon Professional gross margin decreased 80 basis points to 67.7% for fiscal 2016 compared to fiscal 2015. The decrease was a result of unfavorable geographic mix, due to volume increases in North America which has lower than segment-average gross margins, partially offset by the favorable impact of increased pricing.

Salon Professional SG&A spending declined 8% to $814 million in fiscal 2016 from $884 million in fiscal 2015 primarily due to currency impacts. Salon Professional SG&A as a percentage of net sales decreased 200 basis points to 60.9% primarily behind reduced overhead spending from the focus on productivity.

Retail Hair & Cosmetics Retail Hair & Cosmetics operating income decreased 29% to $294 million for fiscal 2016 compared to fiscal 2015, driven by a reduction in net sales and a decline in operating margin, which decreased 340 basis points to 16.1% for fiscal 2016. Operating margin declined due to an increase in SG&A as a percentage of net sales, in part due to unfavorable foreign exchange impacts, partially offset by improved gross margin.

Retail Hair & Cosmetics gross margin increased 70 basis points to 63.0% for fiscal 2016 compared to fiscal 2015. The increase was a result of manufacturing cost savings and the favorable impacts of increased pricing, partially offset by the negative scale effect of lower volume.

Retail Hair & Cosmetics SG&A spending declined 6% to $856 million in fiscal 2016 from $908 million in fiscal 2015 primarily due to currency impacts and lower marketing spending from productivity efforts. Retail Hair & Cosmetics SG&A as a percentage of net sales increased 400 basis points to 46.9% as reduced spending did not keep pace with the reduction in net sales.

Corporate. Corporate operating loss increased to $232 million for fiscal 2016 compared to a loss of $83 million for fiscal 2015, primarily due to the $48 million intangible asset impairment charge and the $83 million termination fee associated with the Dolce & Gabbana fine fragrance license.

Non-Operating Income and Expense

The $29 million of interest expense for fiscal 2016 relates to debt commitment fees (interest expense) on new debt agreements. There was no interest expense in the prior year period. Interest income in fiscal 2015 was $1 million. Non-operating income was $8 million in fiscal 2016 and was $94 million in fiscal 2015 related to gains on divestitures (Giorgio Beverly Hills Fine Fragrance brand for fiscal 2016 and Rochas, Laura Biagiotti and Naomi Campbell Fine Fragrances brands in fiscal 2015). These impacts are recognized in Corporate.

 

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Income Taxes

P&G Beauty Brands’ effective tax rate decreased to 60.5% for fiscal 2016 from 70.9% for fiscal 2015. The base period tax rate included a 36.4% impact due to unfavorable adjustments to uncertain tax positions in multiple jurisdictions driven primarily by P&G Beauty Brands’ share from the resolution of a broader P&G multi-year audit in Germany. Excluding this impact, the current year tax rate increased 26% primarily due to the impacts of the intangible asset impairment charge (which in