- Upsized the payout at the last moment
- Firms bought retailer for $6 billion in 2006
- Planned IPO, now on hold, could go forward
Irving, Texas-based Michaels said July 25 it priced an offering of $800 million in senior PIK toggle notes. Michaels plans to use proceeds of the loan to pay out a distribution to its “equity and equity-award holders,” the statement said.
The $800 million distribution is the first dividend the company has ever issued to its owners, said Charles Sonsteby, Michaels CFO and chief administrative officer. “This is a chance to return capital to our shareholders,” he told sister website peHUB.
Michaels had initially planned to issue $700 million in new debt but upsized the deal at the last moment, Sonsteby said.
Bain Capital and Blackstone acquired Michaels in 2006 in a deal valued at $6 billion. The firms injected $1.8 billion in cash and equity, according to the Wall Street Journal.
With the $800 million dividend, the firms stand to get nearly half of their investment back. Bain and Blackstone own 93.2 percent of Michaels, according to regulatory filings. The hedge fund Highfields Capital Management owns 6.2 percent.
Michaels is North America’s largest retailer of arts and crafts products. Last year, Michaels filed to go public in an IPO that could raise as much as $500 million. Michaels put the IPO on hold last summer after CEO John Menzer suffered a stroke.
Michaels has not withdrawn the IPO filing. A public offering could still happen this year, the Dallas Morning News reported July 24, citing Michaels vice president Joshua Moore.
Michaels results have been lackluster of late. Sales for the nine-week period ending July 6 declined 0.1 percent to $631 million. Same-store sales dropped 2.7 percent, according to a July 24 statement.
Executives at Bain couldn’t be reached for comment; executives at Blackstone declined to comment.
Luisa Beltran is a senior writer for peHUB.