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IPO Report: The Michaels Companies (MIK)

By  +Follow June 26, 2014 3:34AM
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The Michaels Companies IPO, IPO, IPO report, The Michaels Companies IPO Report, IPOs today, stocks to buy nowThe Michaels Companies ($MIK) is a large arts and crafts specialty retailer, the largest in North America based on store count. It is headquartered in Irving, TX,

Fourteen other companies are scheduled for the week of June 23, 2014.  The complete IPO calendar is available at IPOpremium.

The manager and co-managers are J.P. Morgan, Goldman Sachs, Barclays, Deutsche Bank Securities, BofA Merrill Lynch, Credit Suisse, Morgan Stanley, and Wells Fargo Securities.  The joint managers are Guggenheim Securities, Macquarie Capital, Nomura, Piper Jaffray, Raymond James, Stephens, SunTrust Robinson Humphrey, Ramirez, Telsey Advisory Group, and The Williams Capital Group.

MIK scheduled a $500 million IPO with a market capitalization of $4.6 billion at a price range midpoint of $18 for Friday, June 27, 2014 on the Nasdaq. SEC filings

The Michaels Companies IPO Report

Overview

MIK is a large arts and crafts specialty retailer, the largest in North America based on store count.

48% of total Net sales in fiscal 2013, are only available at Michaels, under MIK's private brands.

Valuation

Glossary

Valuation Ratios

Mrkt Cap (mm)

Price /Sls

Price /Erngs

Price /BkVlue

Price /TanBV

% offered in IPO

annualizing May 3 qtr

       

Michaels Companies (The) (MIK)

$3,654

0.9

19.9

-1.6

-1.3

14%

Jan 31 2014 yr

.

0.8

15.0

     

Conclusion

Consider these MIK stats:

Market cap:  $3.6 billion
Total debt:  $3.2 billion

Accumulated deficit: -$2.9 billion
Per share dilution to new IPO investors:  -$32.11

Price-to-tangible book value:  -1.3

It looks like a private-equity sponsored train wreck, but it's not because top line revenue is growing, up 5.9% for Q1 '14 vs Q1 '13, the P/E for the year ended January '14 is 15 and the corresponding price-to- sales ratio is .8.

Those are enough positives for institutions to add MIK to a segment of their portfolios.

The rating on MIK is neutral plus.

Business

MIK is a large arts and crafts specialty retailer

Largest in North American based on store count

With 1,263 stores (consisting of 1,145 Michaels stores and 118 Aaron Brothers stores) as of May 31, 2014 and $4.6 billion in sales in fiscal 2013, Michaels is the largest arts and crafts specialty retailer in North America based on store count.

MIK also operates a market-leading vertically-integrated custom framing business.

Arts & craft experience

With helpful store associates and a broad selection of merchandise combined with compelling in-store events and online content, MIK believes it offers the most complete arts and crafts experience and are the preferred destination in the industry.

MIK carries a broad and deep assortment of approximately 36,000 stock-keeping units ("SKUs") in arts, crafts, scrapbooking, floral, framing, home décor, seasonal offerings and children's hobbies that enable it to satisfy the diverse needs of its customers.

MIK has also developed a robust online platform which promotes social networking, and includes expert tips, project ideas, marketing content and information on upcoming store events.

In recent years, MIK has capitalized on its market-leading scale to create a team and infrastructure dedicated to designing, sourcing and delivering high quality, on-trend merchandise, including a growing number of products under its portfolio of private brands.

Private branded products

MIK’s private branded products, which represented approximately 48% of total Net sales in fiscal 2013, are only available at Michaels and allows MIK to further differentiate its merchandise while enhancing product margins.

MIK is also able to use its scale and market leadership to identify and secure exclusive third party products. MIK believes its compelling store experience and broad product offering distinguishes it from its competitors and position Michaels as the leading brand that defines arts and crafts.

Dividend Policy

No dividends are planned.

Competition

MIK competes with many different types of retailers and classifies its competition within the following categories:

Mass merchandisers: This category includes companies such as Wal-Mart Stores, Inc. (WMT) , Target Corporation (TGT) , and other mass merchandisers. These retailers typically dedicate only a small portion of their selling space to a limited selection of home décor, arts and crafts supplies, and seasonal merchandise, but they do seek to capitalize on the latest trends by stocking products that are complimentary to those trends and their current merchandise offerings. These mass merchandisers generally have limited customer service staffs with minimal amounts of experience in crafting projects.

Multi-store chains: This category includes several multi-store chains, each operating more than 100 stores, and comprises: Hobby Lobby Stores, Inc., which operates approximately 620 stores in 47 states; Jo-Ann Stores, Inc., which operates approximately 790 stores in 49 states; and A.C. Moore Arts & Crafts, Inc., which operates approximately 140 stores primarily in the Eastern United States. MIK believes all of these chains are significantly smaller than Michaels with respect to Net sales.

Small, local specialty retailers: This category includes local independent arts and crafts retailers and custom framing shops. Typically, these are single-store operations managed by the owner. These stores generally have limited resources for advertising, purchasing, and distribution. Many of these stores have established a loyal customer base within a given community and compete based on relationships and customer service.

Internet: This category includes all internet-based retailers that sell arts and crafts merchandise, completed projects and custom framing online. MIK’s Internet competition is inclusive of those companies discussed in the categories above, as well as others that may only sell products online. These retailers provide consumers with the ability to more easily search and compare products and prices compared to visiting a physical store. These sellers generally offer a wide variety of products but do not offer product expertise or project advice.

5% stockholders

Michaels Holdings LLC 92.9%  

Highfields Capital Management LP and related funds 6.2%

Use of proceeds

MIK expects to net $466 million from its IPO. Proceeds are allocated as follows:

to redeem $466 million of the Holdco Notes.

MIK also intends to use cash on hand to pay the applicable make-whole premium of $5 million (1% of the principal amount of the Holdco Notes being redeemed).

The Holdco Notes were issued in July 2013 and mature in August 2018. The interest rate on the Holdco Notes is 7.50% per annum with respect to cash interest and 8.25% per annum with respect to PIK Interest, which is the cash interest rate plus 75 basis points.

Net proceeds of the Holdco Note issuance were used to pay a cash dividend, distribution and other payments to its equity and equity award holders and pay related fees and expenses.

 

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions.


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Results for MIK
Jerry Darmalingum
25 Oct 14 06:50:12
How Much Billionaires Really Spend Each Month http://t.co/5Ha8KwZPkV via @daily_finance $MIK Spoiled?? Totally.
g_simoes
24 Oct 14 11:43:45
How Much Billionaires Really Spend Each Month http://t.co/E5mSTe3v9i via @daily_finance $MIK
Penny Stock Secret
23 Oct 14 22:53:16
The Hottest Way to Make Millions From Stock Market.Click HERE http://t.co/SVqoMkrw2z .. $MIK $UHAL $AFFX
Daily Contracts
22 Oct 14 07:32:02
Real-Time feed of company contracts, original agreements and executive updates from Michaels Stores Inc $MIK http://t.co/NdoPrElZ58
HotKeyTrading
21 Oct 14 22:00:07
All-Time Highs: $SNA $CHSP $TSO $IDA $AMGN $ARG $JWN $LEAF $ORLY $LSTR $PEB $HSNI $MIK $AFSI $VVC http://t.co/XQITF0lRKD #investing #mkt
ゆら@相互フォロー100%
21 Oct 14 21:08:43
RT @HotKeyTrading: Annual Highs: $SNA $CHSP $TSO $IDA $AMGN $MLNX $ARG $JWN $LEAF $ORLY $PEB $LSTR $MIK $BPY $NLS http://t.co/XQITF0lRKD #s…
HotKeyTrading
21 Oct 14 21:00:07
Annual Highs: $SNA $CHSP $TSO $IDA $AMGN $MLNX $ARG $JWN $LEAF $ORLY $PEB $LSTR $MIK $BPY $NLS http://t.co/XQITF0lRKD #swingtrading #spy
Lori Brand
21 Oct 14 12:44:16
RT @Urbane_Gorilla: Texas investor Sam Wyly files for bankruptcy after losing SEC fraud case | Daily Mail Online http://t.co/lsBhOY4RN2 $…
Urbane_Gorilla
21 Oct 14 12:35:05
Texas investor Sam Wyly files for bankruptcy after losing SEC fraud case | Daily Mail Online http://t.co/lsBhOY4RN2 $MIK #MichaelsStores
US Banking News
21 Oct 14 12:03:12
Michaels Companies Sets New 12-Month High at $18.33 $MIK http://t.co/Y1LDW1g3fN
Bshaum
21 Oct 14 12:02:17
RT @StockSignaling: All-Time Highs: $JWN $LEAF $ARG $CHD $ORLY $LSTR $PEB $MIK $HSNI $BLL $AFSI $VVC $GPC $SHW $UNH http://t.co/Vtx6dLy0Nw …
Stock Signaling
21 Oct 14 12:01:32
All-Time Highs: $JWN $LEAF $ARG $CHD $ORLY $LSTR $PEB $MIK $HSNI $BLL $AFSI $VVC $GPC $SHW $UNH http://t.co/Vtx6dLy0Nw #stockpicks #finance
Shelby Holliday
21 Oct 14 04:44:20
Is Staples the latest hacking victim to join family of $HD, $TGT, $mik, etc.? Waiting on details from @SecretService: http://t.co/ptGuWwLJW8
US Banking News
20 Oct 14 06:20:26
Analysts Give Average Rating of Buy to Michaels Companies $MIK http://t.co/24HuTolB6m
InterCooler
20 Oct 14 05:51:22
Michaels Companies’s Neutral Rating Reiterated at Macquarie $MIK http://t.co/dsj1RoFS1b
vaheelfan
18 Oct 14 07:24:21
RT @VexTrades: 10/20 Watchlist: $ASTM, $IPAS, $MATR, $MERU, $MIK, $NAVB, $TGS, $WYY. http://t.co/IDMBKZbbz5
Scott
18 Oct 14 07:01:00
RT @VexTrades: 10/20 Watchlist: $ASTM, $IPAS, $MATR, $MERU, $MIK, $NAVB, $TGS, $WYY. http://t.co/IDMBKZbbz5
Sandman
18 Oct 14 06:34:05
RT @VexTrades: 10/20 Watchlist: $ASTM, $IPAS, $MATR, $MERU, $MIK, $NAVB, $TGS, $WYY. http://t.co/IDMBKZbbz5
StratosTrades
18 Oct 14 06:04:32
RT @VexTrades: 10/20 Watchlist: $ASTM, $IPAS, $MATR, $MERU, $MIK, $NAVB, $TGS, $WYY. http://t.co/IDMBKZbbz5
Brandon Hayward
18 Oct 14 05:57:57
10/20 Watchlist: $ASTM, $IPAS, $MATR, $MERU, $MIK, $NAVB, $TGS, $WYY. http://t.co/IDMBKZbbz5
Analyst Ratings
17 Oct 14 16:49:43
Want automatic email alerts for $MIK $TILE $AXLL $DISH $RL? Subscribe to ARN Daily http://t.co/nSJuDsYidj
				
				
By  +Follow June 26, 2014 3:34AM
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