Retail stocks have done surprisingly well for themselves over the past few weeks. Recent quarterly results from companies like Nordstrom (NYSE: JWN) have shown that the retail sector seems to be making a big comeback. As it turns out, it seems that many institutional investors agree with this assessment, hence why many are buying up shares in the sector while shares are still relatively cheap. On that point, Michaels (NYSE: MIK) shot up over 20% on Wednesday after the company announced it had received an unsolicited offer to go private.
As one of the only arts and crafts retailers out there, Michaels has managed to stay afloat throughout the pandemic while other retailers struggled. At the same time, the rise of e-commerce hasn’t hurt Michaels in the same way it has hurt many other specialist retailers, some of which have gone bankrupt over the past few years.
For these reasons, among others, private equity firm Apollo Management made an unsolicited offer to buy out Michaels and take the company private. The deal would see Apollo acquire all of Michaels’s stock for a price of $22 per share, giving the company a valuation of around $3.3 billion. Michaels responded by saying that the decision was unanimously agreed upon by the board of directors.
“The Company’s impressive growth transformation, including our financial and operational performance in the unprecedented environment of the pandemic, led to an unsolicited offer to buy the company,” said Michael’s Chairman James Quella in an unexpected announcement on Wednesday.
Included in the deal is a 25-day “shopping” period, where Michaels can go around and see if any other buyer is willing to offer a better deal. At the same time, these stipulations tend to be common in these types of agreements, but in this particular case, it’s more of a formality than anything else. For the most part, it seems that Michaels is pretty ecstatic with the deal and doesn’t really want to do anything to rock the boat.
Shares of Michaels are up around 22.3% on Wednesday following the news. After hitting a low of $1.6 per share back in March 2020, Michaels stock has soared to over $22, around a 1,375% gain in value. While Michaels might no longer be undervalued at its current price point, it’s definitely impressive just how well the company’s stock has done, especially as a specialty retailer with a niche market. Not many people would have guessed that Michaels would be one of the big winners in the retail industry by 2021.
Michaels Company Profile
The Michaels Companies Inc is an arts and crafts specialty retailer in North America. The company provides materials, project ideas, and education for creative activities like crafting classes, store events, store displays, mobile applications, and online videos. The company sells merchandise through two stores: Michaels and Aaron Brothers. Michaels’ revenue segments are general crafts, home decor and seasonal, Custom and ready-made framing, and paper crafting. Aaron Brothers offer unique framing assortments. The company operates its own distribution network through a wholly owned subsidiary to supply merchandise in the stores. – Warrior Trading News
