CD&R Makes 3.4x On Sally Beauty Exit

Last week Clayton, Dubilier & Rice announced that 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 buyout firm made 3.4x its money on the deal, which generated a 26 percent IRR, a source told sister Web site peHUB. During CD&R’s tenure, Sally Beauty’s annual EBITDA doubled to $576 million from $286 million, the source said.

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 has 3,123 stores globally.

CD&R’s stake in Sally Beauty dates back to November 2006 when Alberto-Culver spun off the company. The firm invested $571 million in the company for a roughly 47.5 percent holding. Alberto-Culver shareholders, at the time, had 52.5 percent. 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 Beauty from its seventh fund, which raised $4 billion in 2006. Clayton, Dubilier & Rice Fund VII LP has an IRR since inception of 6.68 percent, according to Sept. 30 data from backer California State Teachers’ Retirement System. CD&R’s current fund, a $5 billion pool that closed in 2010, has a 12.96 percent IRR since inception, according to Sept. 30 data from the New Mexico Education Retirement Board.