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Why Michaels Companies Stock Soared Today

By Howard Smith - Mar 3, 2021 at 11:39AM

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An investment management firm is paying shareholders to take the company private.

What happened

Shares of arts and crafts retailer The Michaels Companies (MIK) jumped Wednesday after it announced a deal to be acquired by private equity fund manager Apollo Global Management (APO)

Shares were up 23% as of 10:30 a.m. EST, trading slightly above the transaction price.

So what

The acquisition from funds managed by Apollo gives Michaels an equity value of $3.3 billion at a $22 share price. Including debt, the transaction is valued at $5 billion. Micheals' shares moved up in late February when speculation about a deal began, but the purchase price represents a 78% premium to the 90-day average price.

arts and crafts supplies including paints and brushes

Image source: Getty Images.

Now what

"Apollo's offer represents a compelling value to our shareholders," James Quella, chairman of the Michaels board of directors, said in a statement. Michaels is scheduled to report its fourth-quarter and full-year 2020 results on March 4, but results from its third quarter 2020 supported the company's omni-channel strategy. Sales grew more than 15%, and e-commerce sales increased 128% compared to the prior-year period. 

Ashley Buchanan, CEO of Michaels, said that the decision to be acquired won't change the company's business strategy. He added, "As a private company, we will have financial flexibility to invest in, expand, and improve our retail and digital platforms."

Michaels' shares are currently trading slightly over the $22 transaction price. Some investors may believe another more lucrative offer could emerge, but there's always a risk of the current deal falling through. The best move for investors at this point would be to take the gains and move on.

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