Apollo Global Management announced Wednesday that it would acquire the crafts retailer Michaels in a deal that valued the company at $5 billion.
The acquisition is a bet that Michaels can continue to ride the wave of enthusiasm for crafting spurred by Americans stuck at home during the pandemic. The company, which is based in Irving, Texas, has also invested in its digital business, starting curbside pickup and same-day delivery.
The deal values Michaels shares at $22, a 47 percent premium to the stock’s closing price before news of private equity interest in the retailer was first reported. The deal, which is expected to close in the first half of Michaels’ fiscal year, includes a 25-day “go-shop” period, allowing Michaels to weigh potential superior offers.
Shares of the retailer, which has more than 1,200 stores in North America and some 44,000 employees, have risen nearly 300 percent over the past year, giving it a market capitalization of around $2.3 billion.
The company’s “impressive growth transformation” during the pandemic led Apollo to submit “an unsolicited offer to buy the company,” said James A. Quella, chairman of Michaels.
The deal will bring Michaels back into the hands of private equity after seven years as a public company. Two private equity firms, Bain Capital and Blackstone, acquired Michaels in 2006, taking it private in a deal worth more than $6 billion. The company made its way back into the public markets in 2014, at a market value of about $3.5 billion. Bain is still a large shareholder.
Apollo sees “significant opportunity to enhance the Michaels brand, store experience and omnichannel offering to its customers across North America,” said Andrew Jhawar, a senior partner at Apollo and head of the firm’s retail and consumer group. The firm is buying Michaels through funds managed by its affiliates.
As a private company, Michaels will have “financial flexibility” to further expand its retail and online business, said Michael’s chief executive, Ashley Buchanan.