The company accepted Coty's offer for brands in its professional hair and color, cosmetics, and fine fragrance businesses.
In the statement, CEO AG Lafley said: "The merger with Coty, a strategic acquirer, will provide an excellent new home for these businesses and brands, as well as for the talented people who are operating them. We look forward to a successful transition and we will work together to maximize value for the shareholders of both companies."
The transaction will lead to one-time gain of between $5 billion and $7 billion, P&G said.
Coty shares spiked 18% last month after The New York Post reported that it won an auction for Procter & Gamble businesses. Coty is a beauty products company, and distributes products for brands including Calvin Klein and Adidas.
At the time, Bank of America Merril Lynch analysts estimated that the deal could "more than double Coty's sales.
Shares of Procter & Gamble were higher but little changed in premarket trading.