Seligman & Latz, Glemby

 

Public Ownership in 1983

Regis became publicly owned in April 1983. The company operated more than 300 salons at the time. Piper, Jaffray & Hopwood analyst Dick Pyle, cited by Swanson, said Regis’s success as a salon owner and operator was most likely due to factors such as knowledge of the business, good site selection, favorable leases, steady growth, fair treatment of employees, and consistency of image. Its Regis Hairstylists salons catered to a mostly female clientele–women who were willing to pay upper-end prices for trend-setting services and products.

 

In 1984, Regis bought a chain of about 60 shops that targeted male customers. But according to a 1989 Fortune magazine article by Julianne Slovak, write-offs related to the Your Fathers Mustache purchase cut into earnings for two years, and Regis converted the salons to other concepts.

Executive Vice-President Peter Fudurich, who joined the company in the 1960s when the California chain he worked for was purchased by Kunin, was in line to succeed Kunin as president. Kunin trusted Fudurich and the management team to oversee daily operation of the company. Kunin, already in 1985, had a number of interests outside of Regis Corporation, including television stations and real estate holdings and developments. He was also well known as an art collector, having spent millions on works by 20th-century American painters. Fudurich’s illness and death, however, forced Kunin back into day-to-day involvement in the business.

In 1987, Kunin brought on board Paul Finkelstein, who had worked for both his family’s Glemby International Hairstyling Salons and their chief rival, Seligman & Latz. Anthony Carideo wrote in 1988, “Paul Finkelstein, Regis’ savvy new president, is adding profits to the bottom line after several years of rapid expansion but erratic earnings comparisons.” Finkelstein helped profits by restructuring commissions and emphasizing product sales. Sales for fiscal year 1988 were $192 million. Net income was $7.9 million, up 42 percent from the previous year.

Regis purchased the assets of more than 500 Seligman & Latz salons in August 1988. The nation’s second largest department store beauty chain had Essanelle Salons in about 60 stores, including Saks Fifth Avenue and Neiman Marcus. Regis was granted exclusive rights to run the beauty salons in Saks stores.

Back to Private Ownership in 1988

Regis owned about 700 salons when the company returned to private ownership in October 1988. Wall Street’s expectations regarding their short-term performance and the company’s desire to reward new company managers through equity ownership were among the reasons cited for the change. Public shareholders held 30 percent of stock and received $17.70 per share–a price driven up by protests that the initial offering was too low.

Regis Corp. was merged into Regis Acquisition Corp., a subsidiary of Curtis Squire Inc., a venture capital firm controlled by the Myron Kunin family. The company incurred $113 million in debt to finance the buyout, pay a $33 million cash dividend to Curtis Squire, and purchase the Essanelle Salons. Unfortunately, the highly leveraged financing quickly became a huge stumbling block.

Kunin and Finkelstein had planned a big expansion into the department store salon business. But because of the debt load and changing financial climate, the company was refused new loans. Kunin personally funded the 1989 purchase of Maxim’s Beauty Salons, a chain started by his uncle. Regis intended to purchase Glemby, which produced about $260 million in annual revenues, but could not do so without outside financing.

Banker and Minnesota Twins owner Carl Pohlad was introduced to the scenario. Pohlad and financier Irwin Jacobs were among the owners of MEI Diversified Inc.–a company that, according to Eric J. Wieffering, “made a lot of investors wealthy” in a 1986 bottling company sale to PepsiCo but had been less than successful in subsequent deals. Kunin and Pohlad began discussions regarding an MEI ownership stake in Regis in 1989, but failed to reach an agreement.

A Bad Hair Deal and a Return to Public Ownership in the Early 1990s

Operating income had been improving, but Regis failed to make some of its loan payments, and the terms were renegotiated at much higher interest rates. The hair salon company needed to reduce its debt, so Kunin returned to Pohlad. A deal with MEI was finally struck early in 1990. MEI agreed to purchase the New York-based Glemby Co. Inc., the nation’s largest department store hair salon chain, and Regis’s Maxim’s Beauty Salons Inc. and Essanelle Salon Co. for a total of about $50 million.

MEI held an 80 percent share of the newly formed MEI-Regis Salon Corporation. Kunin and Regis owned the remaining 20 percent, and the company received a contract to manage the salons. More than 2,000 salons were included in the joint venture and had combined annual sales of about $400 million. Regis retained sole ownership of its Regis Hairstylists and MasterCuts salons.

Analysts and investors reacted positively when the MEI-Regis pairing was announced. Wieffering wrote in Corporate Report Minnesota, “Here, they said, was the perfect match: a company with a lot of cash to invest and a business being run by one of the best operators in the industry.” But the deal went sour when the department store salons’ performance failed to meet MEI’s expectations.

MEI vs. Glemby Co.

In May 1991, MEI filed a lawsuit against Glemby Co. Inc. claiming in U.S. District Court that the financial conditions and prospects of the business had been misrepresented. MEI had paid about $30 million for Glemby. Finkelstein, as a member of the founding family, initially was named in the suit but later was dropped from the list of defendants. Seeking to reduce its own debt further, Regis had been making plans to return to public ownership. That action was jeopardized when MEI announced that it also paid too much for the Regis salon chains it had purchased.

Despite building friction, the dispute between MEI and Regis was settled. The two companies agreed on a lower purchase price, and the MEI-Regis hair salons management contract was extended. MEI continued, however, to pursue the suit against Glemby.

1991 Public Offering

The plan to go public proceeded after Regis found debt financing for $92 million in bank loans remaining from the buyout. The June 1991 public offering fell short of expectations: The 3.2 million shares sold for $2 off the asking price of $15, and the company raised only about $42 million. The sale reduced Kunin’s share of Regis to 56 percent. Regis ended fiscal year 1991 with revenues of $307.7 million and net losses of $3.2 million.

The Regis and MEI partnership continued to deteriorate. MEI took over the management of the joint venture salons early in 1992 and changed the name of the operation to MEI Salon Corporation. MEI claimed Regis had mismanaged the stores, but Regis said the poorer-than-expected financial showing of the joint venture was due to the Gulf War and the economic recession. The hair business had been considered recession proof, but sales were sharply down, especially in department stores where most of the MEI-Regis salons were located. A rash of department store bankruptcies forced the closure of 150 to 200 of the MEI-Regis salons. In May 1992, Regis sued MEI for expenses related to the management of the MEI-Regis salons. MEI countered with a $150 million suit against Regis alleging fraud, racketeering, and contract violations.

Consumer Beauty Supply and Trade Secret Development Corp.

As the legal battle raged on, Regis continued to grow. In December 1992, the company purchased Consumer Beauty Supply, a mall-based beauty product retailer that complemented its service-oriented chains. Regis purchased a similar concept from Trade Secret Development Corp. the next year. Both the chains sold brand-named products such as Nexxus and Redken as well as the Regis line. Jennifer Waters wrote, “Both Trade Secret and Beauty Express are considered cash cows of the hair salon industry because of the growth in retail sales in recent years.” The Trade Secret purchase put Regis into the franchising business for the first time.

In the meantime, MEI’s series of losses had forced the company to file for Chapter 11 bankruptcy protection; the dispute with Regis was settled through the U.S. Bankruptcy Court in December 1993. Regis agreed to loan Toronto-based Magicuts Inc. $5.9 million for the purchase of the MEI salons. The settlement, which also included the transfer of Regis stock to MEI, cost Regis about $15 million. The legal battle hit the company’s stock price as well. Regis stock fell from the $13 public offering price to the $6 to $9 range and stayed there until the suit was settled. The stock was trading in the mid-teens in the beginning of 1995.

Further Reading:

 

  • Apgar, Sally, “Regis Plans to Acquire Supercuts,” Star Tribune (Minneapolis), July 16, 1996, p. 1D.
  • ——, “Salon Chain Regis Corp. to Buy Products Retailer,” Star Tribune (Minneapolis), December 8, 1992, p. 3D.
  • “Bad Weather Hurts Sales and Profit for the Quarter,” Wall Street Journal, December 27, 2000, p. B8.
  • Brook, Steve, “MEI Settles with Regis in Hair Salon Dispute,” St. Paul Pioneer Press, May 24, 1991.
  • Brookman, Faye, “Regis’ Formats Meet Many Needs,” WWD, July 11, 2003, p. 12.
  • Carideo, Anthony, “MEI Diversified, Regis on Brink of a Split,” Star Tribune (Minneapolis), March 7, 1992, p. 3D.
  • ——, “Some See Regis Buyback Offer As Low,” Star Tribune (Minneapolis), March 28, 1988, p. 8D.
  • Cecil, Mark, “Acquisitive Regis: No Beauty School Dropout,” Mergers & Acquisitions Report, June 14, 2004.
  • ——, “Regis Wields Its M&A Scissors Over Opal (Regis Corp. Acquires Opal Concepts Inc.),” Mergers & Acquisitions Report, June 2, 2003.
  • Dubashi, Jagannath, “Myron’s Makeovers,” Financial World, April 26, 1994, pp. 48-49.
  • “Edina, Minn.-Based Hair Salons Operator Sees Stock Fall After Lowering Forecast,” Knight Ridder/Tribune Business News, January 6, 2005.
  • Feyder, Susan, “Edina-Based Regis Corp. Is Planning to Buy 154 Wal-Mart Hair Salons,” Star Tribune (Minneapolis), May 10, 1996, p. 3D.
  • Gallagher, Leigh, “Lather, Rinse, Repeat,” Forbes, October 27, 2003, p. 66.
  • Gentry, Connie Robbins, “Retailers on a Roll: Regis Corp. and Haircolorxpress Canvass Domestic and International Markets,” Chain Store Age, July 2002, p. 116.
  • “Global Giants,” Hairdresser’s Journal International, July 2, 2004, p. 6.
  • “Hair Club Joins Regis in $210M Deal,” Daily Deal, November 16, 2004.
  • “Hair Salon Company Regis Settles EEOC Discrimination Case for $3.5 Million,” Knight Ridder/Tribune Business News, August 14, 2003.
  • Jones, Jim, “Tress Chic–The Twin Cities Hair-Care Industry Regis,” Star Tribune (Minneapolis), February 17, 1991, p. 3D.
  • Jones, John A., “Regis Expands Its Hair Salon Empire in U.S. and Europe,” Investor’s Business Daily, June 5, 1996.
  • Jones, Sandra, “Regis Looks to Add Volume to Sassoon; Studio Salons Aiming for Broader Market,” Crain’s Chicago Business, June 21, 2004, p. 28.
  • Marcotty, Josephine, “Edina-Based Regis Corp. Plans to Acquire European Hair-Salon Operator for $6 Million,” Star Tribune (Minneapolis), August 17, 1995, p. 1D.
  • “Minneapolis-Based Regis Grows to Global Salon Chain Giant,” Asbury Park Press (Asbury Park, N.J.), September 27, 2002.
  • Nettleton, Pamela Hill, “Hair Today,” Twin Cities Business Monthly, September 1995, pp. 68-73.
  • Peltz, James F., “Combing for Cash,” Los Angeles Times, July 16, 1996.
  • Peterson, Susan E., “Regis Plans to Acquire Hair Club; Salon Giant Expanding into Hair Replacement Business,” Star Tribune (Minneapolis), November 16, 2004, p. 1D.
  • Pyle, Richard E., “Periscope: Regis Corporation,” Corporate Report Minnesota, October 1983, p. 118.
  • “Regis Acquires 328 Hair Salons,” Wall Street Journal, July 16, 2002, p. D3.
  • “Regis, a Hair Salon Operator and Franchise, Has Named Paul Finkelstein, President and CEO, As Their New Chairman,” Corporate Financing Week, May 10, 2004, p. 4.
  • “Regis, Biggest Owner of Hair Salons, Buys 328 Shops,” New York Times, July 16, 2002, p. C11.
  • “Regis Buys Vidal Sassoon Beauty Salons and Academies,” New York Times, December 19, 2002, p. C4.
  • “Regis Corp. (Buys GGG Group),” New York Times, October 23, 2001, p. C4.
  • Reuthling, Gretchen, “Regis, Owner of Beauty Parlors, Will Buy Hair Club,” New York Times, November 16, 2004, p. C4.
  • Slovak, Julianne, “Companies to Watch: Regis Corp.,” Fortune, January 2, 1989, p. 96.
  • Swanson, William, “Beauty and the Business,” Corporate Report Minnesota, November 1985, pp. 92-96.
  • Tellijohn, Andrew, “Regis Adds Teen Concept: Mia & Maxx,” CityBusiness (Minneapolis, Minn.), December 7, 2001, p. 1.
  • “U.S. Hair-Care Giant to Open Salons in Britain, Daily Mail (London), December 22, 2002.
  • Waters, Jennifer, “Regis Cuts Deal to Buy Trade Secret,” Minneapolis/St. Paul CityBusiness, November 12, 1993, p. 3.
  • Wieffering, Eric J., “Two Sharks in a Bathtub,” Corporate Report Minnesota, August 1992, pp. 57-62.
  • Youngblood, Dick, “Regis Looks Like Winner, By Well More Than a Hair,” Star Tribune (Minneapolis), January 30, 1995, p. 2D.

Source: International Directory of Company Histories, Vol. 70. St. James Press, 2005.