Bob Bernstein, the Kansas City advertising mogul who founded spa and salon retailer Beauty Brands in 1995, on Wednesday submitted an offer to buy several Beauty Brands stores out of bankruptcy.
Absolute Beauty LLC, a business entity controlled by Bernstein and her son and former Beauty Brands chairman David Bernstein, said in a U.S. bankruptcy court filing in Delaware that it was prepared to buy 23 Beauty Brands stores and offer a continuous employment to 875 people.
Beauty Brands, which is primarily owned by a California private equity firm, filed a Chapter 11 bankruptcy claim against its creditors on Jan. 7, at the same time announcing that it had an asset purchase agreement with Hilco Merchant Resources LLC, based in Illinois. The arrangement with Hilco is known in bankruptcy as an offer to buy: Hilco would buy the operating assets of Beauty Brands unless someone else submitted a higher and better bid.
So far, the Bernsteins are someone else. And their case argues that their offer is superior to that presented by Hilco.
Absolute Beauty’s offer is $ 4.65 million to buy 23 Beauty Brands stores and assume their leases. Part of the offer also includes the rental of a beauty brand distribution center.
Some of the stores Absolute Beauty intends to take over include Overland Park, Lee’s Summit, Lawrence, Northland, Country Club Plaza, Liberty, Legends Outlet Mall, Independence and Shawnee. Other locations include those in the St. Louis area, Topeka, Iowa, and Texas.
If the Bernsteins’ offer for the 23 stores is successful, the remaining unbought stores could close as Absolute Beauty has claimed that Hilco is considering liquidating the retail chain.
Absolute Beauty maintains that its offer represents a premium over what Hilco offered to buy in-store.
“Absolute Beauty’s proposal is unequivocally higher and better than Hilco’s liquidation offer,” the company’s filing states.
Bob Bernstein declined to comment on Wednesday. A lawyer representing Absolute Beauty was not immediately available for comment. Hilco representatives were not immediately available for comment.
Bernstein is a longtime advertising director at Kansas City-based Bernstein-Rein. He is credited with inventing the McDonald’s Happy Meal and has had Walmart stores as a customer for decades. Beauty Brands expanded to 55 locations in 12 states with 1,800 employees before Bernstein sold a controlling stake to TSG Consumer Partners in 2014.
Bernstein indirectly owns 5.3% of the outstanding stakes in Beauty Brands and owns nine of its stores and distribution center in Lenexa.
The fortunes of beauty brands have not performed well since the 2014 sale. In December, the company announced it was closing 25 stores and downsizing.
Wednesday’s filing revealed that the Bernsteins were looking in December to buy “a significant portion” of the Beauty Brands business. About three days later, the company told the Bernsteins they had to submit their proposal by December 18 and that it would take a “significant price increase” from a liquidation plan negotiated by Hilco.
The Bernsteins submitted a plan to buy 28 stores and were prepared to put down a 10% deposit on the sale.
“It was greeted with complete silence,” Absolute Beauty wrote in its file.
The Bernsteins were later informed that the company would go into bankruptcy.
Absolute Beauty argues that its offer offers to pay more for the store’s inventory than Hilco’s stalking horse offer and that its offer has a total value of over $ 10 million, compared to $ 9.3 million for that of Hilco.
This story was originally published 16 January 2019 13:42.