Regis Corporation Acquires Alline Salon Group Adding $83M Revenue and $5.8M EBITDA

Rhea-AI Summary

Regis (RGS) has acquired Alline Salon Group (ASG), its largest franchisee, for an initial consideration of $22 million with potential additional earn-out payments of $3 million over three years. The acquisition includes 314 salons operating under Supercuts, Cost Cutters, and Holiday Hair brands across five states, primarily in Michigan, Ohio, and Pennsylvania.

The acquired portfolio generates $83 million in revenue and $5.8 million in EBITDA. The initial consideration represents 3.79x TTM EBITDA, with expected synergies of $1.0-1.5 million by 2026. The transaction was financed through $15 million in credit agreement proceeds, $4 million cash, and $3 million in Regis stock. Post-acquisition, Regis maintains a 93% franchise base, preserving its asset-light model while gaining operational testing capabilities for brand initiatives.

Positive

• Acquisition adds $83M in revenue and $5.8M in EBITDA
• Attractive purchase multiple of 3.79x TTM EBITDA
• Expected synergies of $1.0-1.5M by 2026
• Transaction is EBITDA accretive
• Maintains asset-light model with 93% franchise base
• Provides testing ground for brand initiatives

Negative

• Increases debt through $15M additional credit financing
• 3% dilution of existing shareholders through stock issuance
• Shifts from pure franchise model to hybrid operations

Insights

Financial Analyst

This strategic acquisition of Alline Salon Group represents a compelling value proposition at $22 million initial consideration with potential earnouts of $3 million. The purchase multiple of 3.79x TTM EBITDA (4.31x including earnouts) is notably attractive compared to industry standards, which typically range from 6-8x. The deal structure, combining $19 million in cash and $3 million in stock, demonstrates prudent capital allocation while preserving balance sheet flexibility.

The financial metrics are particularly strong: $83 million in revenue and $5.8 million in EBITDA from the acquired portfolio represent significant immediate earnings accretion. The identified synergies of $1.0-1.5 million by 2026 provide additional upside potential. The financing structure at 2.58x TTM EBITDA maintains reasonable leverage while the stock component and earnout structure align management incentives with long-term value creation.

The transaction transforms Regis's earnings profile by diversifying revenue streams beyond franchise royalties while maintaining an asset-light model with 93% franchise base. This dual revenue stream approach could lead to multiple expansion as the market typically assigns higher valuations to businesses with diversified income sources.

Market Research Analyst

This acquisition represents a strategic pivot that significantly strengthens Regis's market position in the haircare industry. The addition of 314 salons across five states, predominantly in Michigan, Ohio and Pennsylvania, provides critical mass in key markets and enhances operational leverage. The timing is particularly strategic as it allows Regis to capture value from its largest franchisee while maintaining its asset-light business model.

The deal's most compelling aspect is the creation of an in-house testing ground for new initiatives without risking broader franchise disruption. This "proof of concept" capability is invaluable in the current evolving retail landscape where consumer preferences and operational models are rapidly changing. The ability to test and refine innovations before system-wide rollout significantly de-risks future growth initiatives and should accelerate the pace of successful innovation.

The integration of Alline's operational infrastructure provides Regis with direct market intelligence and operational expertise that can be leveraged across the entire franchise system. This closer connection to day-to-day operations positions Regis to better support its franchise network and drive system-wide improvements in efficiency and profitability.

Strategic acquisition of 314 salons strengthens operational footprint while maintaining asset-light model with 93% franchise base

MINNEAPOLIS--(BUSINESS WIRE)-- Regis Corporation (NasdaqGM: RGS), a leader in the haircare industry, announces the acquisition of Alline Salon Group (ASG), its largest franchisee, in a transaction valued at $22 million of initial consideration, with the ability for ASG to earn an additional $3 million ($1 million annually) through earn out payments over the next three years.

Highlights

• 314 salon portfolio operating under the Supercuts, Cost Cutters and Holiday Hair brands across five states, primarily Michigan, Ohio and Pennsylvania
  • Trailing Twelve Month October 2024 (“TTM”) financial highlights:
    • $83 million in Revenue
    • $11.1 million in 4-Wall EBITDA
    • $5.8 million in EBITDA
• Initial consideration represents 3.79x TTM EBITDA; total consideration including potential earn out represents 4.31x TTM EBITDA
• Synergies of $1.0-1.5 million identified, to be achieved in calendar 2026
• Financing structure maintains adequate balance sheet flexibility and leverage (deal financed at 2.58x TTM EBITDA)
• Transaction provides Regis a turn-key operating infrastructure and gets the Company closer to salon operations alongside franchisees; salon portfolio provides testing ground for brand and operational initiatives

Matthew Doctor, Regis Corporation’s President and Chief Executive Officer, commented:

"This acquisition marks another key milestone for Regis and further positions our company for future growth. The transaction represents a path towards strong EBITDA growth from a business that we know intimately, having previously owned and operated the salons that we are acquiring. With an attractive purchase multiple, combined with further operational initiatives and identified synergies, we believe there is substantial value creation potential for Regis and our stakeholders. The transaction structure, with a mix of cash and stock consideration and future earn out opportunities, aligns all stakeholders' interests toward the success of this venture.”

“Beyond the financial aspects, this transaction has significant strategic benefits that we view equally as important. As we have entered a new chapter at Regis, we felt being closer to salon operations was important as we look to drive sales and profitability for our franchisees. The environment we are in has been ever evolving, and we are at a pivotal moment in time with new initiatives on the horizon to advance our brands. Bringing these salons into our operations, we now have an additional proving ground to test and learn business driving initiatives in a controlled environment before broader franchisee implementation, while continuing to engage with franchisees on participation in such pilots. While this transaction builds back up our corporate footprint, we are still very much an asset-light, franchisor with approximately 93% of salons still owned and operated by our franchisees – and continuing to drive their sales and profitability remains our main focus, which is now further aided by this acquisition.”

Mike Sarafa, CEO of Alline Salon Group said, “This transaction is a testament to the hard work, dedication, and resilience of our team members that led to the strong profitability we have achieved over the last several years. We believe our team members will have further opportunity to grow and drive results as part of the broader Regis organization, and we look forward to working with Matt and the rest of the Regis team for the years ahead.”

Strategic Rationale

• Financial Returns and Value Creation: EBITDA accretive with high potential returns; source of revenue and profitability beyond royalties and provides further potential cash generation
• Strengthen Connection to Operations and Franchisees: Regis is now operating salons across multiple brands and geographies and no longer a step removed from the business, providing further operational ties to franchisees in this dynamic environment
• Testing Ground for Innovation: Regis can test and optimize customer and stylist initiatives to ensure recommendations to its franchisees for broader implementation drive results and is operationally feasible
• Scaled Impact: Business drivers have scaled impact as Regis profitability driven not only by corporate-owned portfolio, but increased franchise system results increases value for the overall business
• Business Flexibility: Ability to pursue both corporate and franchisee value creation strategies; flexibility to quickly implement changes or respond to market conditions
• Partnership with Alline Team. Alline has built a strong infrastructure, culture and team who, in partnership with Regis, will operate the business. Combining their best practices with Regis operational expertise is an exciting combination for the future

Transaction Details

Under the terms of the purchase agreement, Regis will acquire all of Alline’s issued and outstanding membership interests for $22 million in a cash and stock transaction, of which $19 million of the initial consideration was delivered in cash, in addition to shares of Regis common stock valued at $3 million. Cash and stock was delivered at closing on December 19, 2024. The agreement also includes additional performance-based earnout opportunities of up to $3 million, in $1 million increments, over the next 3 years.

Regis funded the $19 million cash portion of the purchase price with $15 million in proceeds from an upsize of Regis’ credit agreement with existing lenders, and $4 million from available cash on hand. $3 million worth of stock was issued at the 30-day Volume Weighted trading price and subject to a 1-year lock up agreement.

The transaction is accretive to Adjusted EBITDA and leverage giving effect to the transaction will decrease slightly.

Advisors

Faegre Drinker Biddle & Reath LLP served as legal counsel to Regis, Greenwich Capital Group (“GCG”) acted as exclusive financial advisor and Foley & Lardner served as legal counsel to Alline Salon Group in the transaction.

About Regis Corporation

Regis Corporation (NasdaqGM:RGS) is a leader in the haircare industry. As of September 30, 2024, the Company franchised or owned 4,359 locations. Regis’ franchised and corporate locations operate under concepts such as Supercuts ^®, SmartStyle ^®, Cost Cutters ^®, Roosters ^® and First Choice Haircutters ^®. For additional information about the Company, including a reconciliation of certain non-GAAP financial information and certain supplemental financial information, please visit the Investor Relations section of the corporate website at www.regiscorp.com .

This press release contains or may contain “forward-looking statements” within the meaning of the federal securities laws, including statements concerning anticipated future events and expectations that are not historical facts. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements in this document reflect management’s best judgment at the time they are made, but all such statements are subject to numerous risks and uncertainties, which could cause actual results to differ materially from those expressed in or implied by the statements herein. Such forward-looking statements are often identified herein by use of words including, but not limited to, “may,” “will,” “believe,” “project,” “forecast,” “expect,” “estimate,” “anticipate,” and “plan.” In addition, the following factors could affect the Company's actual results and cause such results to differ materially from those expressed in forward-looking statements. These factors include a potential material adverse impact on our business and results of operations as a result of changes in consumer shopping trends and changes in manufacturer distribution channels; laws and regulations could require us to modify current business practices and incur increased costs including increases in minimum wages; changes in general economic environment; changes in consumer tastes, hair product innovation, fashion trends and consumer spending patterns; compliance with Nasdaq listing requirements; reliance on franchise royalties and overall success of our franchisees’ salons; our salons' dependence on a third-party supplier agreement for merchandise; our franchisees' ability to attract, train and retain talented stylists and salon leaders; the success of our franchisees, which operate independently; data security and privacy compliance and our ability to manage cyber threats and protect the security of potentially sensitive information about our guests, franchisees, employees, vendors or company information; the ability of the Company to maintain a satisfactory relationship with Walmart; marketing efforts to drive traffic to our franchisees' salons; our ability to maintain and enhance the value of our brands; reliance on legacy information technology systems; reliance on external vendors; the use of social media; the effectiveness of our enterprise risk management program; ability to generate sufficient cash flow to satisfy our debt service obligations; compliance with covenants in our financing arrangement; premature termination of agreements with our franchisees; the continued ability of the Company to implement cost reduction initiatives and achieve expected cost savings; continued ability to compete in our business markets; reliance on our management team and other key personnel; the continued ability to maintain an effective system of internal control over financial reporting; changes in tax exposure; the ability of our Tax Preservation Plan to protect the future availability of the Company's tax assets; potential litigation and other legal or regulatory proceedings; or other factors not listed above. Additional information concerning potential factors that could affect future financial results is set forth under Item 1A on Form 10-K. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. However, your attention is directed to any further disclosures made in our subsequent annual and periodic reports filed or furnished with the SEC on Forms 10-K, 10-Q and 8-K and Proxy Statements on Schedule 14A.

View source version on businesswire.com: https://www.businesswire.com/news/home/20241219185440/en/

REGIS CORPORATION:

Kersten Zupfer

investorrelations@regiscorp.com

Hayden IR

James Carbonara

Hayden IR

(646)-755-7412

james@haydenir.com

Brett Maas

Hayden IR

(646) 536-7331

brett@haydenir.com

Source: Regis Corporation

FAQ

How much did Regis (RGS) pay for Alline Salon Group?

Regis paid $22 million initial consideration ($19M cash, $3M stock) with potential additional earn-out payments of $3 million over three years.

What is the revenue and EBITDA contribution from the Alline Salon Group acquisition to RGS?

The acquisition adds $83 million in revenue and $5.8 million in EBITDA based on trailing twelve months October 2024 figures.

How many salons did RGS acquire in the Alline Salon Group deal?

RGS acquired 314 salons operating under the Supercuts, Cost Cutters, and Holiday Hair brands.

How did RGS finance the Alline Salon Group acquisition?

The acquisition was financed through $15 million in credit agreement proceeds, $4 million from cash on hand, and $3 million in Regis stock.

What synergies does RGS expect from the Alline Salon Group acquisition?

RGS expects to achieve synergies of $1.0-1.5 million by calendar year 2026.