Facing mounting pressure from Starboard Value LP, Regis Corp. said Monday that it will accelerate cost cutting, explore the sale of its Hair Club for Men and Women business and make several leadership changes.
Longtime Chairman and CEO Paul Finkelstein will step down from both positions in 2012 and not run for re-election on the board. Regis had previously said Finkelstein would remain as executive chairman.
President Randy Pearce will replace Finkelstein as CEO next February, and the board will appoint an independent chairman in July.
Starboard, a New York-based activist hedge fund that owns 4.4 percent of Regis, launched its campaign in August, blaming the company's weak stock price on a "bloated cost structure and lack of operational focus." Specifically, the fund wants Regis to pare its workforce, reorganize its North American business units and sell off its international operations and its Hair Club restoration centers.
"We strongly believe that Regis should dramatically reduce operating expenses, exit its non-core businesses, and focus on its core North American salon business," according to a letter Starboard sent to Finkelstein and Pearce.
In Monday's proxy filing, Regis appears to have conceded to Starboard on several fronts. The company said it hired Merrill Lynch to see if Regis can sell its Hair Club business. If so, Regis said it would use the money to return excess cash to investors through a dividend or stock buyback.
Regis also said it would seek $40 million to $50 million in cost reductions over the next two fiscal years. The company is looking to save $20 million to $30 million in its current fiscal year.
But Regis' most surprising move was Finkelstein's departure from the company, something Starboard did not explicitly demand. But it was clear Starboard was not happy with Finkelstein's leadership.
