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Here's a real quick rundown of an upcoming spin:

Currently trading at ~$50/share

At the time of the spin, shareholders will receive 1 New Alberto Culver and 1 New Sally Holdings and a $25 special dividend.

Clayton, Dubilier & Rice is buying a 47.50% stake in New Sally Holdings for $575M, putting a Private Market Value (PMV) of about $7 ($6.83)/share on New Sally.

Assuming that a $7 is a fair price for New Sally, that leaves us creating New Alberto at about $18/share at today's prices.

In the Form S-4, one of the pro forma statements suggests that New Alberto would have earned $.75 a share in the year ending 30 Sept 05 and New Sally would have earned $.18 per share had they been separate entities during that period. That leads you to the below P/E's given those assumptions:

24 for New Alberto
38 for New Sally

Rough analysis says not a screaming value. But supposedly CD&R are pretty savvy, so why would they be paying what appears to be a hefty premium for what will be a debt-laden company?

I don't know yet. Some more digging (beyond my five minute rough sketch) is in order. There's still some time before the spin, and hopefully a more detailed look this weekend will be fruitful. Meanwhile, anyone else have any thoughts?



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