Michaels agrees to acquisition by Apollo in $5B take-private deal

The Michaels Cos. Inc. announced today that it has signed a definitive agreement to be acquired by funds managed by Apollo Global Management in a take-private transaction valued at approximately $5 billion, according to a press release.

Committed debt financing backing the transaction will be provided by an arranger group that includes Credit Suisse, Barclays, Wells Fargo, RBC Capital Markets, Deutsche Bank, Mizuho and BofA Securities. Apollo will provide the equity financing.

Michaels Stores Inc. currently has a $1.67 billion first-lien covenant-lite first-lien term loan due September 2027 (L+350, 0.75% Libor floor) that was issued in September 2020 to refinance its previous term loan. The company also issued a $375 million offering of 4.75% seven-year senior secured notes as part of the refinancing transaction. The company also has a $500 million issue of 8% senior notes due July 2027.

The first-lien term loan is quoted at 99.875/100.625. On the bond front, the borrower's $375 million September offering of 4.75% secured notes due October 2027 was four points higher on the day at a pandemic-era high of 108.75. Inked in September to repay term debt, the bonds have bounced around in the 102.5-104.125 range after twice dipping below par. The more actively traded $500 million of 8% senior notes due July 2027 was up 1.875, probing 110 on the highs after straddling 108 since late November.

Apollo will begin a tender offer to acquire all outstanding shares of the company for $22 per share in cash, which represents a 47% premium to the closing stock price on Feb. 26, 2021, the last trading day before speculation over a potential transaction.

There is a 25-day go-shop period in which the company, with assistance from its exclusive financial advisor UBS, will solicit and evaluate alternative proposals. The company will have the right to terminate the current merger agreement and enter into a superior proposal.

The company will issue a press release before market open on March 4 with its financial results for its fourth quarter and fiscal 2020 year but will no longer hold its earnings conference call that was scheduled for tomorrow morning.

Michaels Stores is an arts and crafts retailer. Corporate ratings are currently B/Ba3, with a positive outlook from S&P Global Ratings and stable outlook from Moody's.