Leonard Green & Partners, which has characteristically been on the hunt for retail deals, made a $1.34 billon a share offer for the 99 Cents Only Store.
LG&P is teaming up with the Schiffer/Gold family, which owns about 33% of the company’s outstanding stock, to make the offer. The Schiffer/Gold family is prepared to contribute a “substantial” portion of their existing stock toward the transaction, a statement said. Also, the Schiffer/Gold family hasn’t made any commitment to deal exclusively with LG&P in regards to the takeover, according to the statement.
The $19.09 share offer represents a 14% premium to the company’s closing share price of $16.68 Thursday. On Friday, 99 Cents stock surged more than 17%, or $2.90, to $19.58 in morning trading, suggesting shareholders expect other bidders may emerge with higher offers.
LG&P, a Los Angeles PE firm, has been very focused on retail lately. Last year, the firm made a bid for BJ’s Wholesale Club, which has since hired bankers for a sale. In December it offered to buy Jo-Ann Stores for about $1.6 billion in cash. LG&P, along with TPG, recently closed their roughly $3 billion buy of J. Crew. The firm also bought Aspen Dental last year.
The buyout shop is currently investing out of its fifth fund, Green Equity Investors V L.P., which closed at $5.3 billion in 2007, according to the firm’s web site. LG&P reportedly has been talking to LPs about a new fund.
Negotiations for 99 Cents appear to be in the early stages. The board of 99 Cents said Friday that it hasn’t evaluated the proposal from LG&P. The board plans to form a special committee to consider the offer and will retain bankers and attorneys. “There can be no assurance that any definitive offer will be made, that any agreement will be executed or that this or any other transaction will be approved or consummated,” 99 cents said in a statement.
99 cents, based in City of Commerce, Calif., is an extreme value retailer that has 283 retail stores spread through California, Texas, Arizona and Nevada. It rang up sales of $333.6 million for the second quarter ended Sept. 25, up nearly 3% from $324.7 million for the same time period in 2009. Net income grew 3.4% to $13 million. The company has no outstanding debt as of Sept. 25 and doesn’t maintain credit facilities with any financial institutions, according to a November SEC filing.