Coty (COTY) - Get Coty Inc. Class A Report shares are rising Monday after the cosmetics company said it was exploring strategic options, including a divestiture, for its professional beauty business and its Brazilian operations.
Moving forward, the New York company plans to focus on its fragrance, cosmetics and skin-care businesses.
Coty said that a strategic review showed that even with the segment's strong performance, its growth opportunities lie outside Coty's core focus.
The brand portfolio of the professional business includes Wella and Clairol, among others.
It said it would use proceeds from such a deal to pay down debt and return cash to holders.
The move is backed by Coty's 60% shareholder, JAB Holdings, JAB's managing partner, Peter Harf, said in a statement.
"After stabilizing our operations in fiscal 2019, we announced in early July a plan to turn around Coty's performance," CEO Pierre Laubies said.
"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."
Coty says its professional beauty business is the world's second most popular in professional hair and has partnered with 250,000 hairdressers in 100 countries.
Coty estimates that the businesses under review will generate $2.7 billion of revenue in fiscal 2019.
It has retained Credit Suisse for the review and expects the process to be complete by next summer.
The shares were trading up almost 14% to $11.50 Monday.
For 2019 through Friday, Coty shares were up 54%. The stock had fallen 28% since touching a 52-week high $14.14 on May 17.
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