Little-known New York Firm Buys Large Stake in Regis

According to recent regulatory filings, New York-based Birch Run Capital has purchased an 8.3 percent stake in Regis Corporation and has become the Edina company's third-largest investor.

Regis Corporation has sold a large portion of its shares to a new investor-New York-based Birch Run Capital, LLC.

According to a Securities and Exchange Commission filing, Birch Run bought 4.8 million of Regis' shares-or 8.3 percent of the company's stock-in late January. The investment makes the New York firm Regis' third-largest investor, behind Boston-based Fidelity Management & Research Company, which owns about 14.6 percent of Regis' stock, and New York-based BlackRock, Inc., which owns about 10.6 percent.

Birch Run's investment comes not long after a contentious proxy battle that ended in October, when Regis investor Starboard Value LP, a New York-based hedge fund, won three board seats. Starboard owns roughly 5.2 percent of Regis' stock.

Regis has struggled and trimmed expenses in recent years as consumers have reduced the frequency of their salon visits amid the recession. Its net income dropped more than 79 percent in the fiscal year that ended in June 2011, and it reported a net loss totaling $8.9 million. Revenue, meanwhile, fell about 1.4 percent to $2.32 billion during the period-an improvement from a 3 percent drop the previous year.

Last month, Regis announced that it was laying off 110 corporate employees. Around the same time, Regis President Randy Pearce said that he plans to retire rather than succeed CEO Paul Finkelstein, who is retiring this month. The company had previously announced that Pearce would become CEO following Finkelstein's retirement.

According to a Star Tribune report, there isn't much information available about Birch Run, but the investment firm was formed in 2006 and at the time hoped to raise $300 million.

In 2009, Birch Run reportedly paid $2.25 million to acquire stock in Energy Partners-a Houston-based natural gas producer that had filed for Chapter 11 bankruptcy-and successfully rallied investors to oppose the company's reorganization plan.