Shares of Procter & Gamble Co. jumped more than 2 percent Monday on reports that the consumer products giant is looking into spinning off some beauty brands, which could include Hunt Valley-based Cover Girl.
The Cincinnati-based maker of Crest, Pampers, Olay and Head & Shoulders said in August that it planned to sell off more than 100 brands by the middle of next year to cut costs, leaving it with the 70 to 80 most profitable brands that account for the bulk of sales.
To reach that goal, the company is considering a sale or initial public offering of multiple brands in its beauty division in a single deal, Bloomberg reported Monday. The report, attributed to unnamed sources, said the manufacturer was working with advisers but hasn't decided which products would be spun off.
Shares of Procter & Gamble jumped $1.73 each, the most since October, closing at $83.56 on the New York Stock Exchange.
A company spokesman said on Monday in an email: "We never comment on rumors or speculation."
Beauty products made up nearly a quarter of Procter & Gamble's $83.1 billion in sales last year, the company reported, with top brands including Pantene shampoos, Olay skin care, Head & Shoulders, SK-II skin care and Wella hair products. But sales in the beauty division fell 2 percent, to $19.5 billion.
The Bloomberg report said some fragrances, makeup and hair salon products are among those likely to be sold, while Procter & Gamble is working on turning around the largest brands, Pantene and Olay. The company also is considering selling its Wella hair-care division, the report said. Last year, it agreed to sell its Duracell battery business to investor Warren E. Buffett.
A Procter & Gamble deal would be the latest in a flurry of corporate spinoffs.
"It's sort of trendy," said Karyl Leggio, a professor of finance at Loyola University Maryland. "There are a lot of companies that are spinning off and becoming more streamlined. It would allow Procter & Gamble to become more streamlined."
Large, multi-brand companies typically pursue asset sales to recapture brand values, she said.
"When a company becomes very large, with lots of different brands, the value of any one brand can get mixed in, and the market believes the company is not truly valuing all the pieces," Leggio said. "Over time, the true value of the brand can become lost."
Procter & Gamble's plant in Hunt Valley employs 940 people, according to Baltimore County officials. Cover Girl, which started as the Noxzema Chemical Co. in 1961 in Hampden selling Cover Girl medicated face foundation, moved in 1966 to Hunt Valley, where it expanded into eye makeup, lipstick and nail polish. Procter & Gamble bought the company, then called Noxell, and CoverGirl Cosmetics in 1989, bringing the Max Factor cosmetics line to the plant in the early 1990s.
While it's too early to say what any potential sale of Cover Girl could mean locally, the division is viewed as well run with a strong group of employees, Leggio said. If it is sold, it would likely be because it no longer fits with the Procter & Gamble portfolio, not because of problems, she said.
In light of the market reaction, "it's likely there's activity and discussions," she said. "But whether or not Cover Girl is one of the brands is unknown."
In its 2014 annual report, Procter & Gamble laid out a strategy of strengthening core categories such as baby care and fabric care, narrowing and refocusing the portfolio and "looking at alternatives to partner, divest or discontinue the balance… This will enable us to allocate resources to leading brands."
Procter & Gamble, in business for 177 years and with 23 brands with sales of $1 billion or more, has long been considered a safe investment, said Jeremy Bowman, a contributing analyst for Motley Fool One in Virginia. But, he added, it is a company in transition.
A move to shed brands "may seem like a wise one, as underperforming, little-known brands may only be creating a lag on profits," he said. "But jettisoning so many of them could mean the company is selling its next big star. After all, the growth opportunities for such well-known brands as Tide or Pampers in a developed market is limited."