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Michaels' Merger on Track: Apollo Initiates Tender Offer

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The Michaels Companies Inc. and Apollo Global Management, Inc. (APO - Free Report) remain on track. As agreed, the affiliate of the Apollo — Magic MergeCo, Inc. — has commenced the cash tender offer for all issued and outstanding shares of Michaels for $22 per share. The tender offer is in parity with the merger agreement signed on Mar 2, 2021, wherein Apollo will acquire Michaels through Magic MergeCo for $5 billion. The tender offer is set to expire on Apr 12, 2021.

Per the agreement, the offer price marks a 47% premium from the company’s closing stock price of $15 per share on Feb 26, 2021, and a 78% premium to the 90-day volume-weighted average price. The remaining shares, which are not covered in the tender offer, will also be acquired by Apollo in a second-step merger at the same price. In the second phase of the merger, the transaction of the shares will be funded by equity provided by Apollo managed funds along with committed debt financing.

Apart from these, the deal includes a 25-day go-shop period for Michaels to seek out other offers. In case of a better proposal, the company has the right to terminate the deal. The deal, which is subject to customary closing conditions, is expected to be concluded by the first half of fiscal 2021.

After the completion of the deal, the arts and crafts retailer will become a private company. The transaction will help Michaels invest, expand and enhance its retail and digital channels. Prior to this, the company went private when it was acquired by private equity firms, Bain Capital and Blackstone, in 2006, but became public again in 2014.

As of Jan 30, 2020, the company operated 1,252 stores in the United States and Canada.

Shares of Michaels have rallied 88.4% in the past three months, compared with the industry’s growth of 14.2%.



Michaels Reports Strong Q4 Results

Michaels posted fourth-quarter fiscal 2020 results, wherein the top and bottom lines surpassed the Zacks Consensus Estimate and improved year over year. Notably, comparable store sales (comps) improved significantly in the quarter under review.

Michaels’ adjusted earnings of $1.69 per share improved 34.1% from $1.26 in the prior-year quarter and beat the Zacks Consensus Estimate of $1.57.

Net sales of this arts and crafts specialty retailer grew 11.3% year over year to $1,916.8 million and surpassed the Zacks Consensus Estimate of $1,882 million. The upside can be attributed to strong comps growth of 12.9% in the reported quarter against a 2.4% decline in the prior-year quarter. On a constant-currency basis, comps improved 12.7% year over year.

Strength in the core arts and crafts business has been contributing to quarterly growth. Moreover, robust demand in both stores and e-commerce has been a growth driver. Also, the Zacks Rank #3 (Hold) company’s enhanced and expanded omni-channel capabilities like new delivery options, curbside pick-up; same-day delivery; ship from store; buy online, pick-up in store, or BOPIS; in-app purchases; and more have been aiding online sales growth.

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