Michael’s Stores, Inc. Explore Sale

It was announced yesterday by the board of directors of craft retailer Michael’s Stores, Inc. that they are exploring a possible sale of the company to enhance shareholder value of the company, according to the company’s press release:

Irving, TX, March 20, 2006 – Michaels Stores, Inc. (NYSE: MIK) today announced that its Board has decided to begin a process to explore strategic alternatives to enhance shareholder value including, but not limited to, a potential sale of the Company. The Company said it has retained JPMorgan as its financial advisor in this process, which it expects will take a number of months. There can be no assurance that a transaction will result and the Company does not intend to disclose developments regarding its exploration unless and until its Board of Directors has approved a specific transaction.

The Company also announced its Board of Directors has named Jeffrey N. Boyer and Gregory A. Sandfort as Co-Presidents of the Company. Boyer, previously Executive Vice President and Chief Financial Officer, and Sandfort, previously Executive Vice President, General Merchandise Manager, succeed R. Michael Rouleau, who is retiring as President and CEO after a decade of exemplary service.

Gregory Sandfort said, “The strong operational and financial foundation that Michael Rouleau has put in place will enable us to translate our new strategy for continued growth and success into tangible results. Today, we have the tools, organization, management, merchandise, and suppliers in place to become a truly world-class retailer. We will continue to fully leverage these strengths to enhance our operating performance, develop and execute on our long-term plans for growth and ensure the smooth continuity of our management and operations.”

Boyer, 47, and Sandfort, 50, will report to the Company’s Board and to Chairman Charles J. Wyly, Jr. In addition to continuing as Chief Financial Officer, Boyer’s responsibilities will include information technology, human resources, real estate, strategic planning, legal, and new businesses; Sandfort, who also will be Chief Operating Officer, will be responsible for merchandising, store operations, marketing and supply chain areas. Rouleau, 67, becomes a special advisor to the Board. The office of Chief Executive Officer has been left vacant by the Board, and the duties and authorities of that office have been assigned to the newly appointed Co-Presidents, Boyer and Sandfort. Further strengthening its management team, the Company also announced the promotions, effective immediately, of two senior executives. Harvey S. Kanter, 44, previously President of the Company’s Aaron Brothers business, has been named Executive Vice President – Chief Merchant, assuming Sandfort’s former position.

Thomas Bazzone, 39, who had been President of the Company’s Recollections scrapbooking and Star Wholesale businesses, becomes Executive Vice President – Specialty Businesses, with added responsibility for Aaron Brothers’ art and framing stores as well as future business development opportunities. Chairman Charles J. Wyly, Jr., said, “We have completed a thorough review of the Company’s position, as well as the opportunities Michaels Stores faces over the near and long term. With a rapidly evolving retail market, we are focused on all opportunities to enhance the strength of the Michaels business, attract new customers and more effectively respond to – and shape – their changing arts and crafts interests, even as we continue to build a world-class retail organization and infrastructure.”

Wyly continued: “The Company’s growth under Michael Rouleau has put us in a strong position to consider new ways to realize the full value of our franchise. Our decision to explore strategic alternatives is driven by a commitment to create value for our shareholders and exciting new opportunities for our employees, while positioning the Company to expand market share, improve customer service, and deliver stronger performance.” Wyly added, “We are grateful to Michael for his exceptional leadership and dedication to the Company over the past ten years, and his contributions to making Michaels Stores the nation’s leading arts and crafts retailer. Jeff Boyer and Greg Sandfort have all the necessary skills – strategic vision, financial acumen, merchandising savvy and operational expertise – to lead Michaels Stores into its next phase.”

Company Well-Positioned for Emerging Opportunities

Michaels Stores has had nine consecutive years of record financial performance, increasing its market capitalization from $310 million in 1996 to approximately $4.5 billion in 2006; as of January 28, 2006, the Company was debt-free and had over $450 million in cash and cash equivalents. The Company continues to transform itself into a sophisticated and centralized modern retailer, and has become the industry leader by pursuing an aggressive store opening, relocation and remodel program, creating an efficient and effective infrastructure and keeping a strong focus on ways to enhance its merchandise offerings.

Michael Rouleau said: “After a decade as CEO of Michaels, I leave very proud of what we’ve achieved. Moving forward, I believe that the Company is perfectly positioned to innovate, to broaden our reach, to expand the industry and to better serve customers as a truly world-class retailer. Jeff and Greg are ready to capitalize on the enormous opportunities that lie ahead for Michaels, and now is the time to pass the baton. I have every confidence that our capable management team is up to the task of making Michaels a bigger, more agile, faster growing retailer.”

Jeffrey Boyer said, “I’m excited for the opportunity to help take the Company to the next level, both financially and operationally, building on what Michael Rouleau has accomplished. I look forward to continuing to work with Greg and our exceptionally strong management team to further grow our business and create even greater value for our shareholders.”