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Fabric retailer may go private

Company: Jo-Ann Stores Inc. to be bought by Los Angeles-based firm

Posted: December 23, 2010 8:44 p.m.
Updated: December 24, 2010 4:55 a.m.
 

Fabric and craft retailer Jo-Ann Stores Inc. has entered into an agreement to be acquired by Leonard Green & Partners L.P. for about $1.6 billion. The acquisition, if approved, means Jo-Ann Stores will become a private company.

Leonard Green’s offer translated to $61 per share in cash to stockholders, 34 percent higher than the cost per share as of the closing price on Wednesday of $45.63.

News of the deal, announced Wednesday, sent the company’s stock up $14.56, or 31.9 percent, to $60.19 at close Thursday.

 In a statement released by Jo-Ann Stores lead director, Scott Cowen said the Hudson, Ohio-based company was not actively seeking a buyout but that once the offer was received and negotiated, the company felt it was in the best interest of its stockholders, employees and other partners.

While the deal was approved by Jo-Ann’s board of directors, the company is able to review alternative proposals through Feb. 14. If no other suitable proposals surface and the majority of stockholders approve the transaction, the acquisition is expected to close in the first half of 2011.

The transaction is subject to customary closing conditions, including the receipt of regulatory approvals, but is not subject to any condition with regard to the financing of the transaction.

J.P. Morgan, Bank of America Merrill Lynch and TCW/Crescent Mezzanine have committed financing for the transaction.
Los Angeles-based Leonard Green & Partners is a private equity firm with investments in many other retail companies, including the Neiman Marcus Group, The Container Store, Tourneau, David’s Bridal, Whole Foods Market and Sports Authority. The firm also purchased the preppy fashion retailer J. Crew last month.

Retailer
“We are excited about the prospect of working with Leonard Green and Partners,” said Darrell Webb, chairman and CEO of Jo-Ann Stores.

Founded in 1943, company operates 756 stores in 48 states and competes primarily with Hancock-Fabrics and Michaels Stores. 

According to the company’s third quarter financial report, Jo-Ann’s had no debt outstanding at the end of the third quarter, compared to $47.5 million of debt at the end of the third quarter last year.

The company also reported its sales increased 4.1 percent and it expected earnings per share in the coming year would rise to $3.35 or more.

Jo-Ann Stores has been planning accelerated store openings and remodels in 2012.

“Jo-Ann Stores is a clear leader in the fabric and craft retail industry,” said Todd Purdy of Leonard Green and Partners. “We are excited to partner with Jo-Ann Stores’ talented management team and look forward to the next phase of the company’s growth.”

In the statement released by Jo-Ann’s, Webb said that going private will benefit the retailer.

“We can further accelerate the expansion and upgrade of our stores,” Webb said. “We will continue to offer our customers a superior shopping experience for all of their fabric and craft needs.”

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