Apollo to Acquire Retailer Michaels for $3.3 Billion in Cash

(Bloomberg) -- Michaels Cos., the U.S. crafting and hobby retail chain, has agreed to a sale to Apollo Global Management at an equity value of about $3.3 billion.

Apollo will pay $22 a share to Michaels shareholders, representing a 22% premium from Tuesday's close. The Michaels board has unanimously approved the deal, according to a statement Wednesday.

Although the offer was unsolicited, Michaels Chairman James Quella said it made sense. The company's management “firmly believes Apollo's offer represents a compelling value to our shareholders.”

Apollo's interest in Michaels comes on the heels of the company's best annual stock performance since its latest initial public offering in 2014. Shares rose 61% last year, fueled by all the crafting items and home decor purchased by families stuck at home during the pandemic. That marked a major turnaround from prior years, when the growth of Amazon.com Inc. and flagging sales had forced the chain to shutter dozens of locations.

“While demand may drop back a bit in 2021, the crafting market will remain elevated compared to where it was pre-pandemic,” Neil Saunders, managing director of GlobalData, said in an emailed statement. “Michaels' new owners, Apollo, will be able to take advantage of this as they look to grow the company's top line.”

Michaels shares, which were briefly halted for the announcement, soared as much as 24% Wednesday in New York, the biggest intraday gain since June. The stock had risen 39% this year through Tuesday.

The deal will be funded through equity provided by Apollo managed funds and a financing package to be provided by Credit Suisse, Barclays, Wells Fargo, RBC Capital Markets, Deutsche Bank, Mizuho and Bank of America. It is expected to close in the first half of the fiscal year. The agreement includes a 25-day “go-shop” period, during which Michaels with the assistance of adviser UBS Investment Bank can talk to other potential partners.

A Michaels representative declined to comment beyond the statement. An Apollo representative didn't immediately respond to a request for comment.

Earlier Deal

Michaels, which calls itself North America's largest specialty retailer for categories like arts, framing, floral and do-it-yourself home, previously went private in 2006 when it was acquired by Bain Capital Partners and Blackstone Group.

Private equity firms have announced $47.2 billion of buyouts globally this year, on par with the same period last year, according to data compiled by Bloomberg. The biggest deal -- Stone Point Capital and Insight Partners' $6 billion agreement to acquire Corelogic Inc. -- is the subject of a bidding war with real estate data firm CoStar Group Inc.

Apollo has snapped up struggling assets through its various business arms. The buyout shop also announced on Wednesday that it's teaming with Vici Properties Inc. for a $6.25 billion acquisition of Las Vegas Sands Corp.'s real estate portfolio. Apollo's lending unit MidCap Financial bought Paper Source Inc. after the stationery and craft supplies chain filed for bankruptcy.

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