ORIGINAL: Coty is shifting its focus away from the professional beauty market to concentrate solely on its fragrance, cosmetics and skin care businesses. UPDATE 2: Henkel AG and KKR & Co. are among the companies that have advanced to a second round of bidding for Coty's professional hair and nail products business, per a Yahoo report. Deals could impact Good Hair Day, Wella and Clairol and could reap as much as $8 billion, which could be used to reinvest in the core business. UPDATE 3: Reuters is now reporting that Henkel and KKR "are holding off bidding for a portfolio of beauty brands that Coty Inc. is trying to sell as they fret over the fallout of the coronavirus pandemic." Shuttered salons are in part blamed for the shift in interest. KKR is reportedly taking a wait-and-see approach. The professional business comprises 21% of Coty's business but is likely ailing due to pandemic-related shutdowns.
PREVIOUSLY: Coty has announced that it will begin to "explore strategic alternatives for its Professional Beauty business and associated hair brands, as well as the company’s Brazilian operations, including a divestiture."
The proceeds from a potential transaction will be used to pay down debt and return excess cash directly to shareholders, Coty stated. The potential sale is part of the company's previously announced turnaround plan.
Despite its strong performance, the future growth opportunities of the Professional Beauty business lie increasingly outside Coty’s core strategic focus, the company added.
Pierre Laubies, CEO of Coty, said, "After stabilizing our operations in fiscal 2019, we announced in early July a plan to turn around Coty’s performance. Today’s announcement accelerates this transformation and will help reposition Coty as a more focused and agile company, deleverage our balance sheet, and improve our ability to invest in areas with the greatest growth potential. The Professional Beauty teams have done an incredible job over the past three years in creating a strong business platform, putting us in a favorable position to find the best owner for that business while unlocking significant value for Coty shareholders and allowing us to further grow our core remaining businesses."
The sale of Coty's professional hair and nail products business is officially underway.
According to a finance.yahoo.com article, Coty could earn as much as $8 billion from the sale. Companies expressing interest in the business include Henkel AG Unilever PLC.
First-round bids are due the first week of March 2020.