Jo-Ann Stores announced today that they have agreed to be acquired by Leonard Green & Partners, L.P., a private equity firm, for approximately $1.6 billion. The $61 per share purchase price is a 34% premium over the company’s trading price at market close on Wednesday.
Leonard Green & Partners is a Los Angeles-based private equity firm with over $9 billion in managed capital. Their retail investments include Whole Foods Market, PETCO Animal Supplies, Sports Authority, The Container Store, David’s Bridal, and Neiman Marcus.
The purchase was approved by a unanimous vote of the company’s board of directors, after a recommendation was made to it by a special committee of independent directors.
Jo-Ann Stores’ lead director and chairman of the Special Committee, Scott Cowen, explained the decision:
After a thorough assessment, the Special Committee and the board of directors concluded that the proposal put forth by Leonard Green & Partners is the best way to maximize value for shareholders, who will receive a substantial and immediate cash premium for their shares. While the company was not actively seeking this transaction, once the offer was received and negotiated, the Special Committee determined that it was in the best interest of the company’s shareholders, as well as its employees and other partners. Leonard Green & Partners has significant expertise in the retail space and is dedicated to cultivating and supporting the growth of Jo-Ann’s business.
The transaction still has to be approved by a vote of Jo-Ann Stores stockholders, and receive regulatory approval. Jo-Ann Stores also holds the right to solicit other competing offers for itself until February 14th, 2011 to ensure its stockholders receive the best deal.
Financing for the transaction will be provided by J.P. Morgan, Bank of America Merrill Lynch and TCW/Crescent Mezzanine.
The buyout of Jo-Ann Stores by a private equity firm will leave the struggling AC Moore as the only major craft chain that is publicly held. Hobby Lobby is family owned, and Michaels is owned by private equity groups Bain and Blackstone (although rumors persist that a public stock offering is in the near future).
Jo-Ann Stores has been growing steadily the past few years, increasingly its sales and improving its financial results, making it an attractive takeover target in a declining retail economy. On December 1st, the company announced its 3rd quarter 2011 sales (quarter ended Oct. 31st). Net sales were up 5.1% over the 3rd quarter of 2010, while same-store sales were up 4.1%. For the nearly-concluded Fiscal 2011 year, the company said it expected to open 30 new stores and close 25 stores. In Fiscal 2012 they are planning even more expansion – anticipating opening 55 to 60 new stores. These numbers are in addition to large numbers of store remodels that are also being done. Online has also been an area of growth for the company, where sales have gone up in double-digit percentages, although the website still accounts for only a tiny portion of the company’s total.
The transaction is expected to be completed in the first half of 2011.
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