Coty ponders sale of professional beauty business, Brazilian operations

By

Robin Driver

Published
Oct 22, 2019

New York-based cosmetics conglomerate Coty Inc. announced on Monday that it is weighing up its options for its professional beauty division and associated hair brands, as well as its operations in Brazil, evoking the possibility of a divesture.

 
Coty’s move to explore alternatives for its professional beauty division reflects a wider strategic shift being implemented at the company as part of its ongoing review process, which has determined that the international beauty giant will focus on its fragrance, cosmetics and skincare businesses moving forward.
 
According to the company, any funds resulting from a potential sale would be used to pay down debt, with excess cash going directly to shareholders. Through the divesture, Coty would expect to see a reduction in financial leverage, resulting in a pro forma target leverage ratio of around 3x net debt to EBITDA.

“After stabilizing our operations in fiscal 2019, we announced in early July a plan to turn around Coty’s performance,” explained Coty CEO Pierre Loubies in a release. “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 company’s professional beauty division includes the Wella, OPI, GHD, Clairol and Sassoon Professional brands, among others, and is currently the world number two in professional haircare. The division continues to perform well but, according to Coty, its future growth opportunities “lie increasingly outside the company’s core strategic focus.”
 
Both Coty’s professional beauty division and Coty Brazil are operationally distinct and have their own management and stand-alone business structures. Collectively, the businesses under review are predicted to generate net revenues of $2.7 billion in fiscal 2019.
 
Coty’s board of directors has called in Credit Suisse to assist in its deliberations and expects to complete the review process by summer 2020.