Alberto-Culver Spins Off Beauty-Products Operations

CEO to Retire Once Sally Beauty Co. Becomes Fully Independent

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CINCINNATI (AdAge.com) -- Alberto-Culver Co. will spin off its retail and wholesale beauty-products operations in a $3 billion deal and President-CEO Howard B. Bernick will retire upon the deal's closing, the company announced today.
The $3 billion Sally Beauty spin-off deal will leave Alberto-Culver as a $1.4 billion consumer-products company marketing such brands as VO5 and Tresemme.
The $3 billion Sally Beauty spin-off deal will leave Alberto-Culver as a $1.4 billion consumer-products company marketing such brands as VO5 and Tresemme.

Both moves were widely anticipated after a deal to spin off the Sally Beauty stores and Beauty Systems Group wholesale operations to Regis Corp. fell through earlier this year. Mr. Bernick, 54, was to have left Alberto-Culver to become nonexecutive chairman of Regis as part of that deal, which crumbled after Regis, which was paying for Sally with its stock, missed earnings estimates.

Wife stays on as chairman
The plan will leave Alberto-Culver as a $1.4 billion consumer-products company marketing such brands as V05, St. Ives, Tresemme, Nexxus and Mrs. Dash. Mr. Bernick's wife, Carol Lavin Bernick, will remain as executive chairman. V. James Marino, 56, now president of Alberto-Culver Consumer Products Worldwide, will take over as president-CEO as originally had been planned as part of the Regis deal.

Gary G. Winterhalter, 54, will take over as CEO of the newly independent Sally Beauty Co., which will be publicly traded with 2,465 Sally Beauty stores, 825 Beauty Systems Group outlets, nearly 1,200 sales reps and $2.3 billion in sales.

Alberto-Culver shareholders will get one share in the new company for each of their shares, giving them a 52.5% stake in Sally, plus a one-time $25-per-share dividend. Private-equity fund Clayton, Dubilier & Rice will invest at least $575 million to acquire a stake of about 47.5% in Sally Beauty Co., which will take on about $1.85 billion of new debt.

The deal frees both Alberto-Culver and Sally from conflicts that had become increasingly difficult, Mr. Bernick said in a conference call. In the current setup, Alberto-Culver brands, such as VO5 and Nexxus, compete against Sally's top suppliers, Procter & Gamble Co. and L'Oreal. Sally stores, meanwhile, compete against the top retailers of Alberto-Culver consumer brands, such as Wal-Mart and Target.

The spinoff also could allow Sally Beauty to market to consumers more aggressively than in the past, Mr. Bernick said.

P&G relationship may be restored
Mr. Winterhalter said he believes one of Alberto-Culver's competitors -- P&G's Wella professional business, which withdrew its products from Beauty Systems Group last year as it developed its own sales force -- may return to BSG after the deal closes.

What will remain of Alberto-Culver could be a tempting takeover target, particularly for such overseas personal-care players as Henkel and Kao, which have both been looking to increase scale in the U.S. But Mr. Bernick played down the possibility of any sale of Alberto-Culver.

"There is no intention whatsoever that the company will be sold," he said.
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