Regis to Sell Hair Club Subsidiary for $163.5M
Regis Corporation said Monday that it has agreed to sell Hair Club for Men and Women—a subsidiary that offers various hair-loss products and services—for $163.5 million.
The buyer, Tokyo-based Aderans Company, Ltd., will pay cash under the terms of a definitive agreement that it and Edina-based Regis recently struck.
Selling Hair Club aligns with Regis’ recent efforts to evaluate “non-core” assets, cut costs, and refocus on its North American salon operations. In a related move, Regis in April announced plans to sell its 46 percent stake in Provalliance—the largest hair salon company in Europe. (That deal, however, hasn’t yet closed, and its value has reportedly declined since April as the euro has weakened as compared to the dollar.)
“We believe the sale of Hair Club represents an opportunity to exit a non-core business on attractive terms while taking another significant step in refocusing operational resources on expanding sales, margins, and profitability of salon operations,” Regis Chairman Joel Conner said in a statement.
Aderans provides wigs and hair-transplant services. According to a message from its president that’s now on its website, Aderans’ “domestic business has struggled over the past few years, and business results have persistently charted a downward path”—so the company has been making strategic changes in an effort to turn itself around.
Regis said the deal is subject to customary closing conditions, and it expects to record a non-operational, after-tax gain of between $8 million and $12 million following the acquisition.
Regis has struggled and trimmed expenses in recent years as consumers have reduced the frequency of their salon visits amid the recession. But its major efforts to retool its business followed a contentious proxy battle that ended last October when Regis investor Starboard Value LP, a New York-based hedge fund, won three board seats. The proxy battle occurred after Regis outlined a planned $40 million to $50 million expense reduction over the next two fiscal years—but Starboard said the plans were insufficient and fought for control on the board.
In January, Regis laid off 110 employees from its corporate office. Then in February, the company announced plans to eliminate at least half of its 50 store brands in an effort to cut costs. Regis planned to convert most of the affected salons to the remaining, strongest-performing brands but also said it would need to close some salons.
Earnings for Regis’ fourth quarter and the fiscal year that ended last month haven’t yet been released. But the company announced its fourth-quarter and fiscal 2012 revenue early: Sales for the fourth quarter declined 4 percent to $568.1 million, and sales for the year dropped 2.2 percent to $2.27 billion.
Meanwhile, Regis reported a $1.4 million loss for the third quarter that ended March 31, marking an improvement over the $57.4 million loss during the second quarter. Same-store sales declined 3.4 percent in the third quarter.
As of March, Regis owned, franchised, or held ownership interests in more than 12,700 corporate and franchised locations worldwide that operate under concepts including Supercuts, Sassoon Salon, MasterCuts, Cost Cutters, and Hair Club for Men and Women, in addition to its namesake salons.