Jo-Ann Stores Inc. agreed to be acquired by an affiliate of Leonard Green & Partners LP for $1.6 billion to accelerate expansion of the largest U.S. fabric retailer.
The cash offer of $61 a share was 34 percent higher than yesterday’s closing price of $45.63, Hudson, Ohio-based Jo-Ann Stores said today in a statement. The board can solicit other proposals through Feb. 14.
Going private will enable Jo-Ann Stores to expand faster and boost its share of fabric and craft sales, Chief Executive Officer Darrell Webb said in the statement.
“Remodeling and opening new stores are helping drive revenue at a more profitable rate,” said Brad Thomas, an analyst at Keybanc Capital Markets Inc. in New York. Jo-Ann Stores “has a lot of components attractive to private equity,” including no debt, he said in a telephone interview.
Leonard Green is paying about 7.8 times Jo-Ann Stores’ earnings before interest, taxes, depreciation and amortization over the past four quarters, about the same multiple as the median takeover of a U.S. retailer in the past 12 months, according to data compiled by Bloomberg.
3G Capital, an investment firm backed by Brazilian billionaires, paid about 8.8 times trailing EBITDA for Burger King Holdings Inc., and J. Crew Group Inc. is fetching 8.1 times trailing EBITDA in its buyout, the data show.
Jo-Ann Stores advanced $14.56, or 32 percent, to $60.19 at 4:01 p.m. in New York Stock Exchange composite trading. The shares have climbed 66 percent this year.
The retailer operates 756 U.S. stores and competes with Baldwyn, Missouri-based Hancock Fabrics Inc. and Michaels Stores Inc. Jo-Ann Stores had no outstanding debt at the end of the third quarter ended Oct. 30. Cash totaled $112.4 million at the end of the quarter, $14.7 million more than a year earlier, the company said Dec. 1.
Jo-Ann Stores today boosted its full-year per-share earnings forecast to $3.35 to $3.45 from an earlier projection of $3.20 to $3.35. It told analysts in August it planned to accelerate store openings next year after new units generated higher sales.
Los Angeles-based Leonard Green has invested in 52 companies with a value of $44 billion since its founding in 1989, according to the firm’s website. Last month, the firm agreed buy the J. Crew with TPG Capital for about $3 billion.
JPMorgan Chase & Co., Bank of America Corp. and TCW/Crescent Mezzanine LLC committed financing for the transaction.
Centerview Partners and JPMorgan are advising the Jo-Ann Stores board, and Sullivan & Cromwell LLP and Thompson Hine LLP are the legal counsels. Bank of America and Barclays Plc are advising Leonard Green, which is getting legal counsel from Sanders & Dempsey LLP.