Coty Inc. CEO Pierre Laubies plans to turn around the wider business by boosting margins and reducing leverage through weighing the sale of its Professional Beauty unit.
The New York-based firm took a $965 million writedown last year on the value of brands, including Clairol, that it agreed to purchase from Procter & Gamble Co. in 2015. Coty’s shares have fallen about 48% in the last five years, according to Bloomberg.
Thus, Coty has launched a process to explore strategic alternatives, aiming to complete it by summer. And the sale of its professional hair and nail products business is already drawing interest from some of the world’s largest buyout firms for a unit that could fetch as much as $8 billion.
Bloomberg also reports that buyout firms including Advent International, Bain Capital and Cinven are working with advisers to prepare bids, according to its sources familiar with the matter, asking not to be identified because the discussions are private.
Clayton Dubilier & Rice LLC and KKR & Co. are also expected to make first-round bids, which are due the first week of March. Additionally, Henkel AG (German maker of adhesives and shampoos) has reportedly hired advisers as it explores a bid for the business. (However, representatives for Henkel, Unilever and the buyout firms declined to comment at this time).
Since buyout firms have record levels of capital to spend and access to cheap financing, it is expected to be one of the "most hotly contested auctions" this year. In a similar transaction last year, EQT beat out stiff competition to acquire Nestle SA’s skincare business for more than $10 billion.
Brands that would be included in the sale are Clairol, Good Hair Day and OPI nail care as well as Coty’s business in Brazil. Cosmetics company Boticario Group is also considering a bid to boost its haircare business, CEO Artur Grynbaum told Valor newspaper earlier this month.
Laubies said in an October release, “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 the 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.”