Investors to Acquire Fantastic Sams Chain

A California Bankruptcy Court has cleared the way for a group of investors to acquire Fantastic Sams, one of the largest U.S. hair-care franchises, for slightly more than $17 million from its debt-laden parent, Opal Concepts Inc., bankers involved in the deal said Tuesday.

Cheveux Acquisition, a group formed by four entrepreneurs who own the New England franchise rights for Fantastic Sams, won the bankruptcy auction in Santa Ana.

Cheveux, which was backed by an equity investment by New York-based Pouschine Cook Capital Management and debt financing through G.E. Capital, expects to close the purchase Monday.

The decision marked a setback for Japanese cosmetics giant Shiseido Co. and its U.S. subsidiary, Zotos International Inc., which had owned a minority stake in Anaheim-based Opal.

Shiseido had attempted to assign $8 million it was owed by Opal to a competing group bidding for the Fantastic Sams chain but that move was disallowed by U.S. District Judge John Ryan.

The result was that the winning cash bid in Bankruptcy Court was high enough to pay back bank creditors but not enough for subordinated creditors, including Shiseido, to recoup their financing to the failed hair-care chain operator.

The other competing bidder, which had cooperated with Shiseido, represented a group of regional owners of Fantastic Sams franchises.

Formed in 1974, Fantastic Sams began franchising two years later. Its approximately 1,300 stores in the United States compete with SuperCuts, a unit of Minneapolis-based Regis Corp.

Regis bought Opal’s assets, with the exception of Fantastic Sams, in May for $10.4 million in cash. That transaction included about 286 hair salons operating under brands such as Carlton International, Pro Cuts, Hair by Stewarts and Jose Eber Atelier.

Opal had been advised by Los Angeles-based investment bank Barrington Associates, which specializes in middle-market mergers and acquisitions.

Cheveux was advised by Edison Advisors, also a middle-market specialty investment bank.