CD&R Makes 3.4x on Sally Beauty Exit

We have a little more information on Clayton, Dubilier & Rice’s exit from Sally Beauty Holdings.

Yesterday, the PE firm announced it had sold all of its remaining shares in Sally Beauty. CD&R, which has offices in New York and London, received $1.9 billion in proceeds from its investment.

The PE firm made 3.4x its money on the deal which generated a 26% IRR, according to a source. During CD&R’s tenure, Sally Beauty’s annual EBITDA doubled to $576 million from $286 million, the person says.

The Denton, Texas-based beauty supply distributor sells products such as blow dryers, nail polish and shampoos to retail consumers and beauty professionals. The company generates about $3 billion in annual revenue. Sally Beauty Supply has 3,123 stores globally.

CD&R’s stake in Sally dates back to November 2006 when Alberto-Culver spun off the company. The PE firm invested $571 million in Sally for a roughly 47.5% holding. Alberto-Culver shareholders, at the time, had 52.5%. Sally remained a public company with the deal.

Since last October, CD&R has been selling off shares in Sally via four secondary offerings. The most recent, in June, had CD&R offering about 23.1 million shares. Sally Beauty also bought back about $200 million worth of its common stock from CD&R in May.

CD&R made the investment in Sally from its seventh fund, which raised $4 billion in 2006. Clayton, Dubilier & Rice Fund VII LP has an IRR since inception of 6.68%, according to Sept. 30 data from CalSTRS. CD&R’s current fund, a $5 billion pool that closed in 2010, has a 12.96% IRR since inception, according to Sept. 30 data from the New Mexico Education Retirement Board.

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