Sally Beauty Supply 2007 Annual Report Download - page 37
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amount of equity capital at a time when we need additional capital could have a material adverse effect on our ability to service our debt and operate our
business.
The voting power of our largest stockholder may discourage third party acquisitions of us at a premium.
CDRS, our largest stockholder, owns approximately 48% of our outstanding common stock on an undiluted basis. Pursuant to the stockholders agreement
entered into by us, the CDR Investors and the Lavin family stockholders, which we refer to as the Stockholders Agreement, CDRS has designated five of our
initial eleven directors, as well as the Chairman of our Board of Directors, and CDRS' rights to nominate certain numbers of directors will continue so long as it
owns specified percentages of our common stock. The CDR Investors' ownership of our common stock may have the effect of discouraging offers to acquire
control of us and may preclude holders of our common stock from receiving any premium above market price for their shares that may otherwise be offered in
connection with any attempt to acquire control of us.
The interests of our largest stockholder may differ from the interests of other holders of our common stock.
CDRS, our largest stockholder, owns approximately 48% of our outstanding common stock on an undiluted basis. Pursuant to the Stockholders Agreement,
CDRS has designated five of our initial eleven directors and CDRS' rights to nominate certain numbers of directors will continue so long as it owns specified
percentages of our common stock, as discussed above. In addition, the current Chairman of our Board of Directors is affiliated with CDRS. The interests of
CDRS may differ from those of other holders of our common stock in material respects. For example, CDRS may have an interest in pursuing acquisitions,
divestitures, financings, re-financings, stockholder dividends or other transactions that, in its judgment, could enhance its overall equity portfolio or the
short-term value of their investment in us, even though such transactions might involve substantial risks to holders of our common stock. The manager of CDRS'
ultimate parent is in the business of making investments in companies, and may from time to time in the future, acquire interests in businesses that directly or
indirectly compete with certain portions of our business or are suppliers of us or our customers. Additionally, CDRS may determine that the disposition of some
or all of its interests in us would be beneficial to it at a time when such disposition could be detrimental to us and/or to the other holders of our common stock.
Moreover, the ownership by CDRS of approximately 48% of our outstanding common stock may have the effect of discouraging offers to acquire control of us
and may preclude holders of our common stock from receiving any premium above market price for their shares that may otherwise be offered in connection
with any attempt to acquire control of us.
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Source: Sally Beauty Holding, 10-K, November 29, 2007