Regis to Sell Stake in Big Salon Chain Provalliance
Amid various efforts to reduce costs and simplify its business, Regis Corporation announced Friday that it has entered into an agreement to sell its minority stake in Provalliance-the largest hair salon company in Europe.
The Provost family, the majority owners and operators of the business, will buy Regis' interest for 80 million euros, which translates to roughly $105 million. The deal is expected to close prior to September 30.
Edina-based Regis has owned a minority interest in Provalliance since 2008, when it merged its European operations with the Franck Provost Salon Group. In February 2011, the company paid $56 million to increase its ownership stake from 29 percent to 46 percent.
Provalliance operates salons, primarily under the brands of Jean Louis David, Franck Provost, and Saint Algue.
Regis has struggled and trimmed expenses in recent years as consumers reduced the frequency of their salon visits. Last fall, shortly after losing a contentious proxy battle with an activist investor that subsequently won three board seats, the company announced plans to lower expenses by $40 million to $50 million over the next two fiscal years to improve earnings.
Then in February, Regis said that it would eliminate at least half of its 50 store brands-which now include Supercuts, MasterCuts, SmartStyle, and CostCutters-as part of its cost-cutting effort. The company planned to convert most of the affected salons to the remaining, strongest-performing brands but also said it would need to close some salons. Regis' most recent cost-cutting initiative occurred in January, when it laid off 110 employees from its corporate office.
Regis Executive Vice President and Interim Chief Operating Officer Eric Bakken said Friday in a statement that divesting Provalliance is “part of our ongoing evaluation of non-core assets.”
“We remain focused on enhancing shareholder value through improving the customer experience in our core North American salon operations through simplifying our operating model and supporting our distinct consumer segments with differentiated marketing strategies and product offerings,” he continued.
In connection with the Provalliance transaction, Regis expects to record an impairment charge of between $15 million and $18 million in its fiscal third quarter, which ended March 31.
Last week, Regis reported that its revenues decreased 1.3 percent to $573.6 million in the third quarter-and same-store sales, sales at stores open at least a year, fell 3.4 percent during that period.
The company is among Minnesota's 20-largest public companies based on sales, which totaled $2.3 billion for the most recently completed fiscal year.