Byline: Julie Naughton / with contributions from Alev Aktar

NEW YORK — The salon industry, which has seen more consolidation in the last five years than it has in the past 50, was rocked earlier this week by the announcement that Cosmair Professional has signed a letter of intent to acquire Matrix Essentials from Bristol-Myers Squibb.
As reported, Cosmair signed the deal late Monday evening. It is expected to close during the second quarter and is subject to customary governmental and corporate board approvals. While the purchase price was not disclosed, industry sources estimated that it topped $500 million.
Bristol-Myers had said on Jan. 6 that it was selling Matrix in order to concentrate on its Clairol retail and professional brands. Matrix, acquired by Bristol-Myers in August 1994 for an estimated $400 million, was founded in 1980 by Cleveland-based salon owners Sydell and Arnold Miller.
The deal, when completed, will make Cosmair by far the dominant player in the U.S. salon products business. Under its New York City-based Cosmair Professional unit, Cosmair already owns large chunks of the professional hair color business with its Redken and L’Oreal Professionel brands. And Matrix, with 1999 sales of $342 million, is said to be the U.S.’s largest salon products company.
Cosmair Professional unit president Jim Morrison currently oversees both Redken and L’Oreal Professionel. When the Matrix deal is finalized, Matrix executives will also report to Morrison.
It is widely agreed that the acquisition will strengthen areas in which Cosmair is already a strong player, like hair color, as well as give it a strong wet line — defined as a shampoo, styling product and conditioner collection — with Matrix’s Systeme Biolage collection. In fact, of the $342 million that Matrix did in sales last year, $100 million is said to have come from Systeme Biolage, a shampoo, conditioner and styling line.
And each of the Cosmair Professional brands occupies a slightly different niche. Redken, which Cosmair acquired from founder Paula Kent Meehan in 1993, is known as a fashion-forward hair color and styling brand, while L’Oreal Professionel is well known for its upscale hair color and its salon technologies. Matrix, on the other hand, is often noted for its moderately priced wet-line products, available in more than 80,000 salons in the U.S., including J.C. Penney salons. Matrix also holds strong positions in the professional market with its hair color lines and its OptiCurl perm line. In addition, it is known for its breadth of distribution; it is the most widely distributed salon line in the U.S.
The purchase will also significantly add to the bottom line of L’Oreal’s worldwide salon business. “Matrix will be an ideal complement to our division’s portfolio, since it provides a brand with very broad distribution and audience reach,” said Alain Leprince-Ringuet, vice president of L’Oreal’s global professional products division, in a statement. “It will also help us pass the $10 billion francs threshold of annual sales for the division.”
While Morrison has said that Matrix will continue to be run as a separate business entity, he said it was too early to comment on a specific business plan — except to say that Cosmair expects to make “minimal changes” in Matrix’s organization. For the present, Matrix will stay in its Solon, Ohio, headquarters.
However, L’Oreal executives have already stated that they have big international plans for the brand. That’s good news for Matrix, which under Bristol-Myers had limited success cracking the international market. Matrix is currently available in a handful of countries outside the U.S., including Italy and the U.K.
“With the acquisition of Matrix, the group will significantly reinforce its worldwide leadership in the professional salon industry,” added Lindsay Owen-Jones, chairman and chief executive officer of L’Oreal SA, in a statement. “We foresee very fast international development for this outstanding brand.”
Morrison added that L’Oreal’s salon business in well over 100 countries worldwide will help drive that growth. “L’Oreal as a company has a massive infrastructure, so we have a head start in any country that no one else has,” he said.
Many are watching closely to see what the deal will do to Matrix’s distributor base — particularly because in several sales territories, Cosmair’s other professional brands and Matrix are handled by competing concerns. In the salon industry, distributors serve as middlemen, buying the products from manufacturers and reselling them to salons.
“I think it’s very positive that Matrix has been acquired by a company with a very strong background in the professional beauty industry,” said Michael Spano, executive director of the Beauty and Barber Supply Institute (BBSI), an industry organization for distributors. “Both Redken and L’Oreal are strong brands that complement Matrix nicely. I don’t think that Bristol-Myers was the best environment for a company like Matrix to thrive in. I think it’s a great move for Cosmair, which now becomes even more of a powerhouse in the professional beauty industry. Overall, I would say that it’s good news for the industry.”
“I’m very pleased that Matrix is staying in the hands of people that understand the salon industry and have a loyalty to it,” added Rick Kornbluth, president and chief operating officer of salon products company Graham Webb International, who at one time served as director of channel marketing for Matrix. “It is my hope and belief that Cosmair will maintain the professionalism of Matrix, which means so much to the professional salon industry. Other alternatives might have brought the brands to [traditional mass marketers and drugstores], which would not have been good for our industry.”
Industry analysts also applauded the move. “Bristol-Myers did a pretty good job of managing and maintaining its position and its leadership in the color and cosmetics segments of the salon business, as well as the hair,” said John Horvitz of Horvitz & Associates, an industry consultancy. “In reality, I don’t think that Clairol was the kind of company that could bring the entrepreneurship, the fashion leadership and the authority necessary to grow the nonhair segments of the business.”