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Michaels goes private in the Apollo case

Michaels MIK 22.20%

Cos. Becomes private as part of a leveraged buyout of Apollo Global Management Inc.

APO 0.96%

which values ​​the arts and crafts seller at $ 3.3 billion, after the pandemic boosted the retailer’s fortunes.

Michaels’ business suffered at the start of the Covid-19 pandemic when several of its 1,200 sites were temporarily closed. But sales surged in the summer and fall after many housebound people spent more time – and money – on crafts, knitting and decorating their homes.

This would be the second time the retailer has been managed by a private equity owner. Michaels was privatized in 2006 by Bain Capital and Blackstone Group LP in a transaction valued at over $ 6 billion. It went public again in 2014.

Michaels Chairman James Quella said in prepared remarks Wednesday that the company’s board of directors “strongly believes that the Apollo offer represents compelling value to our shareholders.”

Apollo, which has more than $ 450 billion in assets, is offering to buy Michaels stock for $ 22 each. The companies said the offer represented a 47% premium over the shares closing on February 26, the day before speculation on a deal. On Wednesday, shares were up 22% to $ 22.02.

Apollo and Michaels said the deal deal provided for a 25-day period during which Michaels could consider other options, but there is no guarantee the process will lead to a better deal.

How will the pandemic affect U.S. retailers? As states across the country struggle to get back to business, the WSJ is studying the changing retail landscape and how consumers might shop in a post-pandemic world.

Former Walmart Inc. executive Ashley Buchanan became CEO of Michaels in April 2020. In a recent interview with the Wall Street Journal, Buchanan described the company’s old approach as being more focused on seasonal decoration. “We have shifted to being arts and crafts focused,” he said in the interview.

Crafts sales were strong during the pandemic as consumers took shelter in place. In the retailer’s third fiscal quarter ended Oct. 31, net sales climbed about 15% and same-store sales – a key indicator of retail growth – rose about 16%.

Before the health crisis, Michaels struggled with declining sales. It reported net sales of $ 5.07 billion for its fiscal year ended Feb. 1, 2020, down from the previous year, which also saw a decline. The results of his exercise, which has just ended, are expected on Thursday.

Write to Allison Prang at allison.prang@wsj.com

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