Regis Investor Wins 3 Board Seats in Proxy Fight
Regis Corporation activist investor Starboard Value LP scored a major victory in its contentious proxy battle with the Edina-based hair-care company.
Regis said that according to a “preliminary vote count,” shareholders at the company's annual meeting elected Starboard's three nominees to the company's board of directors: Jeffrey C. Smith, Starboard CEO and chief investment officer; James P. Fogarty, former CEO of plus-sized apparel retailer Charming Shoppes; and David P. Williams, the former chief financial officer of Chemed Corporation, which operates an end-of-life care provider and Roto-Rooter.
“Today is a great victory for shareholders,” Smith told the Star Tribune following the vote. Regis didn't disclose the number of votes for and against the nominees in a Thursday announcement about the election.
But in that announcement, Regis issued a statement saying: “The Regis board and management team have had a constructive dialogue with our shareholders throughout this process and we value their support and perspectives. We are committed to working cooperatively with our new directors as we work to drive positive, significant changes at the company that better position us to drive increased customer traffic, deliver excellent customer experiences, and create value for our shareholders.”
Four of the seven people nominated by Regis, including current CEO Paul Finkelstein and three independent nominees, were elected to the board alongside the Starboard nominees.
Starboard is a New York-based hedge fund that owns roughly 5.2 percent of Regis' stock. In August, it 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 planned changes, including the appointment of President Randy Pearce to the position of CEO in February and a $40 million to $50 million expense reduction over the next two fiscal years.
But Starboard sharply criticized Regis' plans, saying they were insufficient. It then sent a letter to Regis shareholders, asking them to support the election of its three nominees to the board.
Regis then sent a letter to shareholders, urging them to vote for its board nominees. “We believe Starboard is advocating uninformed and irresponsible cost-cutting that puts the franchise at risk,” Regis wrote in the letter. “In contrast to Regis' plan, which is based on a bottom-up analysis of the particular expenses that can be reduced without harming Regis' long-term prospects, Starboard's cost-cutting targets seem to be arbitrary and lack a supporting plan to achieve these targets.”
Regis pointed out in its letter that it has reduced its debt by more than $490 million in less than three years and said that it has a “strong record of profitable growth.” It also told shareholders that “none of the Starboard nominees has as much experience in the key areas of our business as Regis' highly-qualified nominees.”
Regis, one of Minnesota's 25 largest public companies, 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 last year.
The company's 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 attributed to accelerated depreciation and restructuring, Regis' 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.