Michaels Files to Raise $500 Million in Initial Offering

Michaels Stores Inc. (MIK), the arts and crafts retailer owned by Blackstone Group LP (BX) and Bain Capital LLC, filed to raise $500 million in an initial public offering.

Michaels didn’t specify the number of shares it plans to sell or the price range in a filing today with the U.S. Securities and Exchange Commission. The amount is typically a placeholder used to calculate fees and may change.

Large private-equity firms are under pressure to find exits for their investments as they seek to raise new funds. Fund returns, a measure the firms use to market themselves to potential investors, are negatively affected as companies mature in a fund’s portfolio past about five years, according to a report last month by PitchBook Data Inc.

Sales at Michaels rose 4 percent to $4.2 billion in the year ended Jan. 28. Profit at the company, which has almost 1,200 locations, surged 71 percent to $176 million. Chief Executive Officer John Menzer, a former vice chairman of Wal- Mart Stores Inc. (WMT), has been at Michaels since 2009.

A group led by Blackstone and Bain bought Michaels in a 2006 deal valued at about $6 billion. About $1.6 trillion in leveraged buyouts were completed from 2005 to 2007, the biggest buyout boom on record, according to London-based researcher Preqin Ltd.

At the time, the Michaels acquisition was the biggest announced retail buyout since a group led by Bain and KKR & Co. (KKR) agreed to buy Toys “R” Us Inc. in a $6.6 billion deal in March 2005. Luxury retailer Neiman Marcus Group Inc. (NMG) was bought in 2005 by TPG Capital and Warburg Pincus LLC in a deal valued at about $5 billion.

Hispanic Customers

The company sees room for at least 1,500 stores in North America, including new formats for smaller and urban markets, according to the filing. Its typical customer is a woman between the ages of 36 and 55, with a median household income of about $75,000. Michaels says it’s targeting Hispanic customers with classes in Spanish and marking key events such as Quinceaneras, or fifteenth-birthday celebrations, as well as seeking to add customers in the 8 to 18 age range.

The company had $371 million in cash and cash equivalents on its books as of year-end, and $3.4 billion in long-term debt. It employeed 45,300 last year, most of them part-time.

The stock will be listed on the New York Stock Exchange under the symbol MIK. JPMorgan Chase & Co. (JPM), Goldman Sachs Group Inc. (GS), Barclays Plc and Deutsche Bank AG are managing the IPO.

To contact the reporters on this story: Devin Banerjee in New York at dbanerjee2@bloomberg.net; Lauren Coleman-Lochner in New York at llochner@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.