Michaels Files to Raise $500 Million in Initial Offering

Michaels Stores Inc., the arts and crafts retailer owned by Blackstone Group LP 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., 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. agreed to buy Toys “R” Us Inc. in a $6.6 billion deal in March 2005. Luxury retailer Neiman Marcus Group Inc. 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., Goldman Sachs Group Inc., Barclays Plc and Deutsche Bank AG are managing the IPO.

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