Investor group crafts bid for Michaels Stores

Press Announcement Distributed by Michaels Stores, Inc.

Private auction brings offer of about $40 per share, sources say
Michaels Stores Inc., the arts-and-crafts chain that put itself up for sale in March, received rival offers from two buyout groups, people with direct knowledge of the auction said.

Bain Capital LLC, Blackstone Group LP and Thomas H. Lee Partners LP bid about $40 a share, valuing the Irving-based retailer at almost $5.3 billion, said two people.

A second group, which had included Apollo Management LP with Kohlberg Kravis Roberts & Co. and Fort Worth-based Texas Pacific Group, made a higher offer, said another source with direct information. However, Apollo dropped out, that person said.

Spokesmen for Michaels and the other companies declined to comment Thursday.
The Bain group's offer is at the lower end of the $39 to $43 a share expected by Credit Suisse analyst Gary Balter in March, when Michaels said it had hired J.P. Morgan Chase & Co. to find a buyer. Still, it would be the largest buyout of a retailer since the $6.6 billion purchase of Toys "R" Us Inc. in 2005.

"Michaels Stores has steady cash flow through a good, sticky customer base, while leveraged buyout firms have a lot of money they need to put to work," said Louis Meyer, an analyst at Wall Street Access in New York.

Michaels may sell for as much as $41 a share, he said.

Billionaire Sam Wyly and his brother Charles own a 7.8 percent stake in the company, which has no long-term debt. Sales at Michaels increased 8 percent to $3.68 billion last fiscal year.

The deadline for initial bids was June 21, said the people, who declined to be identified because the auction isn't public.

Michaels shares rose 35 cents to $38.22 in New York Stock Exchange composite trading. They stood at $33.96 before the auction was announced on March 20.