Headline: Allou Health & Beauty Care, Inc. (Amex: ALU) Responds to Inquiries
Regarding Sale of Majority Interest in E-Commerce Subsidiary
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The Internet Has Become the Information Super Highway and as with
Any Highway the Road Signs Are Not Always Clear
BRENTWOOD, N.Y., April 26 /PRNewswire/ -- Allou's management believes that
in the best interest of its valued stockholders and the entire financial
community, it clarifies the information contained in the April 23, 1999 press
release, regarding the sale of its majority interest in The Fragrance Counter,
(TFC) its wholly-owned Internet subsidiary for $37.5 million in cash and
notes, of which, $20 million goes to Allou with the balance into TFC; thus,
insuring TFC sufficient capital for going forward operations.
Management is the first to admit that while the facts of the transaction
were stated correctly, the release fell short of detailing why the decision to
sell and the impact the Company believes the sale will have on its
stockholders.
Allou's management has enormous confidence in the E-commerce market and
believes strongly that it will change the way retail business is conducted in
the future. They were fully committed; witnessed by their substantial
marketing investment to purchase prime real estate on the Net. Today, TFC is
the premier site for fragrances and beauty products; receiving praise for its
quality products and customer satisfaction.
Experience has also taught the Company that for TFC to maintain its lead
position and simply break even would require marketing expenditures exceeding
$40 million over the next few years.
In order to provide sufficient funding for TFC to achieve its objectives
three options were explored:
1. take TFC public
2. raise funds through a private placement
3. fund TFC internally
During August 1998, Allou reached an understanding with an investment bank
to consider taking TFC public; however, the valuations of TFC were not
sufficient to justify an amount that would ensure TFC's long term viability.
Furthermore, given the modest valuation of TFC, management was unable to
attract so called first tier investment bankers.
Regarding the third option, funding internally was not in reality a viable
option, because it would have placed an enormous burden on the parent
Company's financial infrastructure.
Therefore, the parent Company concluded that the sale of majority interest
to "The Sudbury Group" a grade "A" venture capitalist led by Dr. Samuel Waksal
was the best solution based on The Sudbury Group's strong financial strength
and presence in the financial markets, coupled with talented personnel from
the entertainment and media worlds. The new investors will move TFC from
solely an E-commerce site to a portal containing content which includes high
profile celebrities who will interact with customers offering them advice on
beauty and well being.
How will this impact Allou's performance?
As a direct result of the solid reputation of the new investors in the
financial community, it is management's opinion that given their business
model put forth, the 13 percent Allou retains of TFC will prove more valuable
under the leadership of its new owners than the 83 percent Allou previously
owned. Furthermore, Allou's initial $10 million total investment to develop
TFC has yielded a profit of approximately $10 million as a result of the
transaction. In addition Allou's liquid book value stands at an historic
level of $10.91, up from $9.21, prior to the sale. The influx of cash permits
Allou to reduce debt, reduce interest expense and improve bottom line
performance. Most importantly, it provides the Company with sufficient
capital to aggressively pursue acquisitions and other ventures that will
further enhance the Company's strong distribution business.
SOURCE Allou Health & Beauty Care, Inc.
-0- 04/26/99
/CONTACT: David Shamilzadeh, Senior Vice President, Chief Financial
Officer of Allou Health & Beauty Care, 516-787-1312/ |
