Regis Corp. to acquire Barbers Hairstyling for 28.3 times earnings

Weekly Corporate Growth Report, Feb 1, 1999

The Deal: Regis Corporation has agreed to acquire The Barbers, Hairstyling for Men and Women in a stock-for-stock merger valued at $51 million, or $12.77/share. Terms of the deal call for each shareholder of Barbers to receive 0.33 shares of Regis common stock, representing a fully diluted ownership interest of 5.8% of the combined companies. The transaction is intended to be accounted for as a pooling of interests. Since The Barbers' compounded annual growth rate has exceeded Regis' in the last four years, the deal is expected to be immediately accretive to future earnings. Regis will also be providing the Barbers franchise group with an exit strategy they otherwise currently don't have.

Discussion: The deal will strategically combine two of the industry's leading companies. The Barbers' management team will provide Regis with 35 years of experience in franchising hair salons. Additionally, the deal will make Regis the sole provider of salon services in Wal-Mart. This move will allow Regis to exceed 1,000 Wal-Mart salons in the near future. On a combined basis, there are currently 336 company-owned salons and 149 franchised units operating in WalMart. Within the next four years the companies forsee 750 company-owned and 250 franchised Wal-Mart salons. The Barbers, Hairstyling for Men & Women provides hair styling and hair care products through 979 franchised and company-owned salons, operating primarily under the names Cost Cutters, City Looks Salons International and We

Care Hair. Regis Corporation is the largest owner, operator, franchisor and consolidator of hair and retail salons in the world. It operates and franchises over 3,600 salons in six divisions, Including Supercuts and MasterCuts.