The proxy battle between Regis Corp. and activist investor Starboard Value escalated Wednesday as the hair salon company sent a letter to all shareholders urging them to vote for the company's slate of directors.
Regis said that "Starboard's attacks on Regis are misleading" and called the investment firm's understanding of Regis and its business model "superficial."
Starboard, a New York-based activist hedge fund that owns about 5.2 percent of Regis, is demanding that the Edina-based owner of hair salons cut $100 million in costs, sell off noncore assets, and reorganize its core North American business.
Regis told shareholders that it has tried to reach a settlement with Starboard and was prepared to add one Starboard director to the board. But Starboard has demanded three representatives on the six-member Regis board. Regis also said that adding three board members is disproportionate to the 5.2 percent of the shares it owns.
Regis officials declined to comment beyond the letter to shareholders.
Jeffrey Smith, CEO of Starboard, could not be reached Wednesday.
Last week, Regis said it would explore selling off its Hair Club for Men and Women business, cut $40 million to $50 million in costs over the next two years, and that Regis' chairman and CEO, Paul Finkelstein, would leave the company next year, according to documents filed with the Securities and Exchange Commission.
But for Starboard, the fight boils down to board representation. Regis' slate of six board nominees did not include any of Starboard's candidates: Starboard CEO Smith; former Charming Shoppes CEO James Fogarty, and David Williams, who previously served as executive vice president of Chemed, a provider of hospice care, repair, and maintenance services.
Starboard's response last week to Regis' announced reorganization plan makes it almost certain that Starboard will push to have all three of its nominees elected to the board so they can assure that extensive cost-cutting and corporate governance changes are made.
Smith said previously that Regis directors have "overseen the significant destruction of shareholder value."
In its letter Wednesday, Regis countered: "We believe Starboard is advocating uninformed and irresponsible cost-cutting that puts the Regis franchise at risk."
The proxy fight could reach its conclusion at Regis' Oct. 27 annual stockholders meeting at its headquarters in Edina.
Staff writer Steve Alexander contributed to this report. Patrick Kennedy • 612-673-7926