A Clayton, Dubilier & Rice (CD&R) managed fund will invest at least $575 million to acquire an equity stake of approximately 47.5% in Sally Beauty Company. Approximately $1.85 billion of new debt will be arranged by Merrill Lynch and Company. These combined amounts will be used to fund the special $25 per share cash dividend.
Sally Beauty Company will become a standalone publicly traded company with its 2,465 Sally Beauty stores, 825 Beauty Systems Group (BSG) outlets and an 1,181-person direct sales force calling directly on its salon customers. Sally generated revenue of $2.3 billion for the trailing twelve months ended March 31, 2006, and had pre-tax operating earnings of $244 million.
Gary Winterhalter will continue as president of Sally Beauty Company, and will assume the CEO role and will join the Sally Beauty Company board of directors following the separation. Carol Lavin Bernick will continue in her role as executive chairman of the board of the Alberto-Culver Company. After the closing, V. James Marino will become Alberto-Culver’s president and CEO and will join the Alberto-Culver Company board. "Sally Beauty Company and our consumer products businesses have demonstrated, in the company’s remarkable 15 year run of consecutive sales and earnings record performances, the ability to innovate, to grow sales and to grow margins,” said Bernick. “A large part of that success is due to the continuity and strength of the exceptional management teams each business has had and those leadership teams will remain in place. Recently, the businesses have faced growth constraints caused by customer and vendor conflicts between the units which will now be eliminated. I believe the growth potential for an independent consumer products group and an independent Sally Beauty Company should provide substantial benefits for the shareholders of both companies.
"We believe that the expertise Clayton, Dubilier & Rice will bring to Sally Beauty Company’s retail and distribution businesses will also be a significant growth driver. The Board and I, as a major shareholder, look forward to the contributions we believe they will make."
"This move unlocks strategic, long-term value for Sally and BSG,” said Winterhalter. “Sally will no longer be limited in their pursuit of consumers away from other retailers and into Sally stores. Likewise, Sally and BSG will no longer have to balance the fact that their largest vendors are competitors of the Alberto-Culver consumer business. Under nearly 40 years of Alberto-Culver ownership, Sally and BSG have grown and strengthened to become market leaders in their respective categories. This position of strength will enable us to continue to build both the Sally and BSG businesses as we pursue growth via new store openings, better trained sales consultants, persuasive advertising, new product lines, expansion of existing product lines, acquisitions and other growth initiatives. Furthermore, we have a strong, dedicated team in place to manage the business and facilitate future growth."
"With this action, Alberto-Culver becomes a focused global consumer products company,” said Marino. “We expect that the separation will eliminate the channel conflicts that we have experienced as well as competition for company resources. Our emphasis will be our consumer brands and maintaining and building long-term relationships with our trade partners by marketing and delivering world-class brands that delight our consumers."
