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Technology Stocks : ALU - Allou Health & Beauty: Another Web Play -- Ignore unavailable to you. Want to Upgrade?

To: Linda Kaplan who wrote (338)	4/26/1999 1:50:00 PM
From: Linda Kaplan	Read Replies (1) \| Respond to of 418

Headline: Allou Health & Beauty Care, Inc. (Amex: ALU) Responds to Inquiries Regarding Sale of Majority Interest in E-Commerce Subsidiary ====================================================================== 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/

To: Linda Kaplan who wrote (338)	4/26/1999 11:05:00 PM
From: Questerr	Read Replies (3) \| Respond to of 418

Hello Linda and fellow shareholders. Well, after an enlightening 1/2 hour conversation with David Shamilzadeh CFO I feel much better about this transaction. ALU did a little market research and determined (to be successful) $40 million would have to be spent over the next 3-4 years to make FC fly. Their research also uncovered it would take them the same 3-4 years to generate $40 million in revenues - 4 years and a lot of hard work to just break even. FC had only earned from inception through 12/98 $3 million. Most investment bankers told them the revenue stream (forget about EBITDA) wasn't sufficient to draw more than $30-$40 million in an IPO, which FC would burn through fairly quickly at the current expense run rate ($10-$12 million/year). Allou attempted a private placement/convertible debt deal last summer - even traveled to Europe to meet with potential investors - David S. and mgt. did not like the terms of the agreement being proposed for Allou shareholders - so they passed. In the fall, they almost went public with an investment bank, but the Asian/Russian/Bond market fiasco put that deal on hold, indefinitely. Then they started talking with some high profile Venture Capitalists, and the deal we read about today was consumated. Some of the good news that didn't make it into the press release...the investor group of Subdury is headed by Dr. Waksal (CEO of Imclone or Inclone Biotech - aren't they the new cancer drug company - sounds familiar?). Some of the partners he enlisted in this deal...are you ready for this...Lawrence Tisch (Loews Corporation), Wayne Huzienga (Founder Blockbuster & Waste Mgt., that National Used Car company, if my memory serves me), Hambrecht & Quist, and Leon Black (Apollo Mgt., Vulcan Partners) This is the cream of the cream of "A" list investors. They are going to have celebrities featured on the site...Martha Stewart, and others. Apparently they have some pretty big plans for FC (along the lines of a major lifestyle portal). ALU gets exclusive privilege to sell their product through the FragranceCounter site. Book value stands at almost $11. ALU is going to eliminate their $100 million credit line facility and convert to a $100 million bond offering (exchanging ST debt for LT). ALU's new manufacturing plant in CA is coming on line in a matter of months (manufacturing margins will expand considerably from this event). Allou will be announcing 2 new acquisitions in the very near future. ALU has 14% margins in the brick and mortar manufacturing and distribution business, compared to 7% for 4-5 of their largest competitors. ALU has net income margins of 1.5% compared to .7% for 4-5 closest competitors. ALU has a P/E of less than 12, these same 4-5 competitors have P/E's that average 34!!! I told him he needs to get off the DEAD AMEX exchange - he agreed. He will tackle that later this year and apply to NYSE (costs $180K for listing, all other expenses brings the tab to $250K). He liked the AMEX, has a nice relationship with the specialist, but understands the stock is under-followed and it is time to move on. He didn't trust the NASDAQ market makers when Allou used to have their listing there - "wild west, and then some". On the NYSE you don't get an appointed specialist, you draw from a pool - he isn't ecstatic about this, but realizes this is the price Allou has to pay to play with the big boys. Last but not least, sometime this year or next, Allou is going to launch another web-site "Allou.com" - he will compete against the PriceClubs and Walmarts with Health and Beauty aids. With FC, perfume prices had to be offered at suggested retail, or he would risk being cut-off by the Perfume manufacturers themselves. Health and Beauty he plans to go "head to head" with the discounters. With much expanded manufacturing capabilities, he is going to "private label" Allou products and other manufacturers (Sears, Wiley Coyote (?), and a few others). Today he has no analyst coverage - he said from the FC deal alone, all of the above mentioned investors seem interested in ALU and its business plan. He also thinks HQ may have some interest in covering ALU with analysts because of their mutual investment in FC. I could go on a little bit more - but I was having hand cramps trying to write it all down when he and I were talking. Expect HUGE earnings this quarter because of the $19.5 million - he is going to reinvest this into his 2 un-announced acquisitions. When FC goes public in a 1 year or 2, he is going to dividend out the 13% to shareholders. David S. thinks Subdury group and investors want to take the company public at a price north of $500 million. He was out of town when the press release came out, and was LIVID at the PR team he hired. This was the first press release ever released that he did not personally write for the company in 12 years - said it will never happen again!!! I was so pleased with everything I heard, I bought quite a few more shares today. He thinks when the dust settles, people will realize "how good things really are and the stock price will react accordingly." Of all the CEO's/CFO's I have ever spoken with, David is extremely sharp, articulate, focused on his business, and to use his own words - "out to earn a lot of $$$$ for shareholders". A good man is at the Allou helm - hopefully time will prove this.