After Proxy Fight, Regis Adds Eighth Board Member
Regis Corporation has appointed current President Randy Pearce to its board-marking the expansion of the company's board to now include eight directors.
The Edina-based hair-care company announced Pearce's appointment several hours after revealing that an activist investor had won three board seats following a contentious proxy battle leading up to the company's annual shareholder meeting on Thursday. Starboard's nominees now account for three out of eight board members-as opposed to three out of seven.
The company also confirmed its earlier announcement that Pearce will succeed Paul Finkelstein as CEO in February.
“We welcome Randy to the Regis board of directors,” Finkelstein said in a statement. “Randy has been an integral part of the company since he joined Regis over 25 years ago. We look forward to benefiting from his insights, leadership, and experience gleaned throughout his career as Regis implements important revenue and cost initiatives to increase shareholder value.”
Starboard Value LP, a New York-based hedge fund that owns roughly 5.2 percent of Regis' stock, in August asked Regis to cut at least $100 million in expenses, sell its non-core businesses, and elect three new board members.
In early October, Regis announced its CEO succession plans and a $40 million to $50 million expense reduction over the next two fiscal years-but Starboard described the plan as insufficient and urged Regis shareholders to support the election of its three board candidates. Regis then sent a letter to its shareholders stating that Starboard was advocating for “uninformed and irresponsible cost-cutting that puts the franchise at risk,” adding that Starboard's nominees lacked the industry experience shared by its board recommendations. But shareholders sided with Starboard, and its three nominees ultimately won board seats at Thursday's shareholder meeting.
The company's board now includes Pearce, four of the company's recommendations-Finkelstein, Joseph Conner, Stephen Watson, and Michael Merriman-and Starboard's three nominees, James Fogarty, Jeffrey Smith, and David Williams.
A recent commentary in the Star Tribune suggests that Starboard's ascension to the board will likely result in layoffs, and “lots of them,” especially at the company's headquarters in Edina. It points out that when the firm won a disputed proxy contest at Eden Prairie-based Surmodics last year, the company soon after said it would slash its work force by nine percent.
Regis, one of Minnesota's 25 largest public companies, has struggled and trimmed expenses in recent years. It reported a net loss of $8.9 million in the fiscal year that ended in June; revenue, meanwhile, fell about 1.4 percent to $2.32 billion during that period.
Its first-quarter net income, released Thursday, totaled $8.3 million, or 13 cents per share, down from $18.3 million, or 32 cents per share, for the same period last year. Excluding one-time charges, net income totaled 26 cents per share, missing Wall Street expectations by a penny.
The company operates more than 12,700 salons, cosmetology education centers, and hair restoration centers worldwide-including franchised locations.