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Jo-Ann Stores To Go Private In Buyout

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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8 Responses to Jo-Ann Stores To Go Private In Buyout

  1. Denise December 23, 2010 at 8:52 pm #

    I’m hoping more JAF stores will have MORE scrap supplies. There’s only one close to me that has a lot, the others have only small sections. The Michael’s and AC Moore stores near me have smaller scrap selections as well, but there is one Michael’s that I love because it has the entire center of the store as scrap related. That store and the one remaining LLS are both over an hour away from me and are my only place to get supplies other than the net or waiting for the Creating Keepsakes events at King of Prussia. It’s a bad time for scrapbooking stores in our region. :(

  2. Renee J. December 24, 2010 at 1:35 am #

    Thank you for sharing this information with us, Nancy! I am absorbing it all. For now, I just want to say that I am surprised.

  3. Jan Scholl December 24, 2010 at 3:10 am #

    As a former stockholder in Michael’s, I am still angry at what private equity has done to that company. I then saw much the same happen with Toys R Us- which recently went back to public after a private holding. I have cut back my visits to Joann’s even as I have nowhere else to shop for fabrics, because of the rudeness I have encountered that management will have to deal with sooner or later-I know it’s not just me complaining. I nearly bought Joann’s stock with my payout from Michael’s for my retirement Roth but am glad I didn’t. I chose another sector-Internet goodie Google. If Michael’s goes public again, I won’t invest. I now “know” too much about local and regional stores (I make friends with all the managers and ask lots of questions). The biggest problem retail-wise with all these craft stores is the cheapness of the products they sell. No one keeps up on trends or style at any of them, and the recalls have hurt them with their store/private brands over the last 6 years. Yet, they are clearancing out the national brands and stocking more of the unknown cheapie dollar items. I find myself spending less and less and hoping I come across a specialty store if I get outside the area (Flint, MI-that is all you need to know, right?) -at least the wonderful yarn shops still are there, but the stamp/scrap stores are going away fast. One closed local today and I know another will announce after the holidays she is done, too. But she can’t say it was the chains as the chains don’t have new product. like she did ..just old rehashed items. See, I am getting angry again and I don’t even have a stake in Jo’s or Mike’s other than my George’s..

    • Cathy Doan December 27, 2010 at 10:49 am #

      Hi Jan,

      I teach at Di’s Ink Stamp n Crafts in Bay City. I just read your post and was wondering if you would tell me what stores are closing?

      We have a great selection of product in the store and if you haven’t come up I hope you do soon.

      Cathy Doan

  4. Sherry Moss December 24, 2010 at 9:13 am #

    Thanks for the update. I HOPE & PRAY that something is done about the dirtyness of my local JoAnn store (Lexington, KY) and the inadequacies of the staff, beginning wth MANAGEMENT. It is the most unkempt, dirty and overall messiest store I have EVER been in and stay away from it, unless I HAVE to go in for some reason.

    TFS and keep us posted on all the goings on of all these companies.

    MERRY CHRISTMAS to each and every one of you and have a SAFE & HAPPY NEW YEAR.

    Sherry M
    aka
    CricketsDaughter

  5. janet green December 25, 2010 at 12:54 pm #

    I’m surprised by this buyout also. :\
    My Jo-Ann’s in Arlington, Tx ,is really nice! I’ve had nothing but great shopping experiences there. The management goes way out of the way to make sure their customers are taken care of. They have very friendly and helpful staff members also. I have only good things to say about them and hope they continue to prosper in the years to come.

  6. Renee Lecatsas December 28, 2010 at 12:05 pm #

    That is very interesting news. Thank you for sharing. I have two Jo Ann’s one in Reading, PA which is a dirty disaster, and one in Quakertown, PA which is beautiful. You would never know they were related if the name wasn’t the same. They are about an hour apart. Crazy! I’ll just have to wait and see how things change.

  7. MB January 28, 2011 at 3:02 am #

    There is not a single Joann’s store in the entire NYC or Westchester area. Of the few stores I’ve been to in Long Island, its the same inventory over & over again. Very few new, updated or trendy scrapbooking items are ever added. As for the website, you used to be able to get free shipping after your third order for the year. They stopped that a couple of years ago & I haven’t ordered from them since!

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