MELROSE PARK, IL—Alberto-Culver will spin off its Sally Beauty Supply Co., separating its distribution business and retail stores into separate companies, and allowing Sally to expand its retail stores and products offered within them.

The transaction is expected to be complete in December. Alberto-Culver shareholders will continue to own 100% of the Alberto-Culver business, and 52.5% of Sally Beauty Supply. A fund managed by Clayton, Dubilier & Rice (CD&R) will invest at least $575 million to acquire the remaining 47.5% of Sally. When the spin-off is complete in December, the independent Sally Beauty Supply will be a $2.3-billion business with 2,465 Sally Beauty stores and 825 Beauty Systems Group (BSG) outlets.

“CD&R sees opportunities at accelerating the Sally growth rate, not only in the US, but internationally,” said Gary Winterhalter, president of Sally Beauty Co., during a conference call Monday. “They also see opportunities on the Beauty Systems Group side of the business.” The deal also can expand Sally’s retail product lines.

“Conflicts have developed over the last few years between Sally and BSG’s many vendors being Alberto Culver rivals,” said Howard B. Bernick, who will retire as Alberto-Culver’s president and CEO when the spin-off is complete.

Alberto-Culver shareholders will own one share of Alberto-Culver stock and one share of Sally Beauty Company stock for each ACV share, and receive a $25 per share one-time dividend. Sally Beauty Co. will become a new public company listed on the New York Stock Exchange.

The $3-billion move comes less than three months after Alberto-Culver’s board declined to recommend a $2.2-billion deal that would have spun Sally off into a merger with competitor Regis Corp., after Regis reduced its earnings forecast.

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