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August 16, 2011 – Comments (0) | RELATED TICKERS: RGS

The successful activist investor fund Starboard has a new target, Regis Corporation (RGS)...of all things a salon operator.  It should be noted that Regis also owns everyone's favorite haircuttery, Supercuts and the Hair Club for Men.  I'm no fan of salons, but I am a bug fan of Starboard, so if they think there's value here there very well may be.

It recently sent a letter to the company's board of directors stating "that Regis trades at a steep discount to the value of the sum of its parts and far below its specialty retail peers as a result of deteriorating operating results, driven in part by a bloated cost structure and a lack of operational focus."  The stock is cheap, trading at around 3.2x Enterprise Value / EBITDA before today's pop.  This compares with an EV / EBITDA multiple of 6.9x for what Starboard is a group of Regis' peers.

Starboard believes that RGS should "Starboard stressed that Regis should dramatically reduce operating expenses, exit its non-core businesses, and focus on its core North American salon business."  It has nominated three people for election to the company's board of directors in an effort to push some of these changes through.

Starboard believes that these changes would result in $100 million in cost savings.  While I am not adding a position to RGS in real life, I have decided to add it to my CAPS portfolio.

Starboard Value Delivers Letter to Regis Corporation

http://finance.yahoo.com/news/Starboard-Value-Delivers-prnews-1428869719.html?x=0&.v=1

Deej

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