Regis Corporation Expands with Alline Salon Group Acquisition

Regis Corporation Completes Strategic Acquisition

Regis Corporation (NasdaqGM: RGS), a renowned leader in the haircare industry, has recently made headlines with its acquisition of Alline Salon Group (ASG), which stands as its largest franchisee to date. This transaction, valued at $22 million with a potential additional $3 million earned through performance-based payments over the next three years, marks a significant move for the company as it seeks to bolster its market position.

Financial Highlights of the Acquisition

This acquisition entails a portfolio of 314 salons that operate across established brands such as Supercuts, Cost Cutters, and Holiday Hair. These salons span five states, primarily focusing on key markets.

Revenue and EBITDA Performance

For the trailing twelve months (TTM) leading to October 2024, Alline Salon Group reported impressive numbers: $83 million in revenue, alongside an EBITDA of $5.8 million. Furthermore, Alline demonstrated a robust four-wall EBITDA of $11.1 million, showcasing the profitability and sustainability of its operations.

Valuation Insights

The initial consideration paid by Regis represents 3.79 times the TTM EBITDA, and when including potential additional payments, the total consideration increases to 4.31 times TTM EBITDA. This strategic move underscores Regis's commitment to strengthening its financial foundation while providing opportunities for enhanced profitability.

Strategic Advantages of the Acquisition

Matthew Doctor, the President and CEO of Regis Corporation, expressed excitement regarding this acquisition, perceiving it as a crucial milestone that provides a pathway for future growth. He noted that Regis is keenly aware of the operational landscape it’s entering, having previously owned and operated many of the salons being acquired.

Operational Synergies

The transaction also highlights significant operational synergies estimated between $1 million and $1.5 million, slated to be realized by 2026. These synergies reflect the potential to streamline operations and enhance profitability through shared best practices and resources.

Strengthening Franchisee Relations

Additionally, this acquisition signifies a strengthening of Regis's connection to its franchisees, allowing the corporation to engage more closely with salon operations. The ability to operate salons directly not only enhances operational oversight but also enables Regis to develop and implement successful initiatives more efficiently.

Conclusion of the Deal

The final agreement stipulates that Regis will acquire all of Alline’s membership interests for a total immediate consideration of $22 million. The cash portion of this transaction has been strategically funded through a combination of credit facility drawdowns and existing cash reserves, showcasing Regis's solid financial backing.

This acquisition is poised to be accretive to Regis's adjusted EBITDA, while also maintaining a healthy leverage position. The versatility in sourcing financial support aids the company in pursuing competitive advantages while also delivering value to its stakeholders.

About Regis Corporation

Regis Corporation (NasdaqGM: RGS) continues to lead the haircare industry with a robust network of 4,359 locations as of the latest count. Operating under various brands, including Supercuts, SmartStyle, and Cost Cutters, Regis is dedicated to meeting client needs while also focusing on franchisee success. The company remains committed to driving sales and profitability for their franchisees, which form a substantial base of its operations.

Frequently Asked Questions

What companies are included in the acquisition?

Regis Corporation has acquired Alline Salon Group, which includes a portfolio of 314 salons primarily operating as Supercuts, Cost Cutters, and Holiday Hair.

What financial metrics were reported by Alline Salon Group?

Alline Salon Group reported $83 million in revenue and $5.8 million in EBITDA for the trailing twelve months leading to October 2024.

How does the acquisition affect Regis's relationship with franchisees?

This acquisition strengthens Regis's connection to its franchisees, enhancing collaboration and operational oversight while fostering sales and profitability.

What are the estimated synergies from this acquisition?

The identified synergies from the acquisition are estimated to be between $1 million and $1.5 million, expected to be realized by 2026.

How is the acquisition being financed?

The acquisition is financed through a mix of cash from credit facility and available cash on hand, combined with the issuance of Regis common stock.

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