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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
StockNewsWires
19 Dec 14 18:33:03
$TGT $T $MIK $HD: Has America Lost Its First Cyberwar? Sony Corporation Waves The ... http://t.co/vR47kA3c52 http://t.co/MrgmIIQpRB
FairyFedmother
19 Dec 14 10:10:59
@BrattleStCap Changed my name, used to be a Silkscreen and we talked about Kohls....what's your latest thought on $MIK
4-traders.com
19 Dec 14 05:58:07
#Graphene 3D Lab : GGG to Complete CDN $1 Million Private Placement http://t.co/LesHAce3il $MIK
BlackCabbieTrader
19 Dec 14 03:51:17
19/12/14 Long Watch List Part 3 $LB $LE $MAS $MD $MIK $MOH $MPG $NU $NWL $O $OCR $ORCL $PCG $PEB $PEG $PETM $PF $PKG $PNC $PNW $POR $REG
TopFlight Trades
18 Dec 14 21:01:40
New Highs w/Strong Demand: $CEMP, $FTNT, $PLAY, $MOH, $ACN, $FIS, $SWKS, $CME, $DYAX, $SSNC, $JLL, $HUM, $AHS, $MIK, $LE, $INFN, $SCOR
Professor_money
18 Dec 14 15:07:17
We had $INGN, $MGNX, $MIK, $XNCR, and $CALA today!!! I hope your day was as great as ours!
Dakota Financial
18 Dec 14 13:20:44
Michaels Companies Reaches New 12-Month High at $25.08 $MIK http://t.co/PCnByZBM0w
ProTradersNews
18 Dec 14 12:23:12
$MIK: Michaels Companies Reaches New 12-Month High at $25.08 (MIK) http://t.co/VDixKxzwek http://t.co/RWCrN0Wi58
Derald Muniz
18 Dec 14 09:13:59
"@neoalvaro: add to this list: $IDTI $MIK" < $MIK does look great, a LOT of recent Option action in $IDTI
Mr. Breakout
18 Dec 14 08:34:58
Leader List Top Gainers $VDSI $MIK $FICO & Biggest Losers $AFSI $ABAX $MANH ►►► http://t.co/GDaibabkE9
Michal Nalevanko
17 Dec 14 22:21:11
$MIK gets high-volume pocket-pivot-style support at 10DMA, RS line in new-high territory. Industry group rank #7. http://t.co/aq5Nxu5Axo
NASDAQ
17 Dec 14 17:11:05
$MIK - Executives Ask If a Sony-Style Hack Could Hit Home http://t.co/Ue2AEVlQOQ
Derald Muniz
17 Dec 14 14:23:09
Michaels remains in the Box, building a new Base. $MIK http://t.co/JIhWADwLgq
Daily Contracts
17 Dec 14 13:13:02
Real-Time feed of company contracts, original agreements and executive updates from Michaels Stores Inc $MIK http://t.co/7Jn5WesBkQ
John Pishko
17 Dec 14 12:09:01
cont... $PTCT, $MIK, $RCPT, $BURL, $AMAG
John Pishko
17 Dec 14 07:48:06
Some names are tightening up and forming potential low risk entry points: $INFN, $MIK, $CDK, $STRP, $ZLTQ, $PANW, $TREX, $SMCI
Zacks.com
17 Dec 14 06:14:03
How do broker recommendations affect a stock's performance? $XOXO $PCG $MIK $ALSN $ADBE http://t.co/5wNU8b2657 http://t.co/ncv02Z1w1E
Jon Boorman, CMT
16 Dec 14 12:24:13
$MIK when I first went into a Michaels I thought it was a second-hand store. Great chart. http://t.co/AiUvof9gZh
Stock Signaling
15 Dec 14 05:31:39
Visual Stock Comparison Tool: http://t.co/S9oPUZ8PN3 : $CP $INVE $GST $DSX $YHOO $CONE $ABCO $SNSS $LLY $SPLS $AR $BKW $MIK $UAL $RALY #mkt
Roberee
15 Dec 14 05:01:36
Shopping this past weekend. What results? Very good customer service at $LULU good at $WSM $DDS ok at $M poor at $TJX $BBY $MIK $GPS $DIS
Nasdaq Trades
14 Dec 14 06:03:48
RT @SwingTradeAlert: IBD:Niche retailers stay nimble, turning mobile e-commerce into an opportunity http://t.co/zXoPR9Fovb $PETM $MIK $ULTA…
spyia
14 Dec 14 04:15:03
RT @stockgoat: Watchlist continued - $PETM $MIK $MELI - http://t.co/8vJ5Cj4EuG
Stockgoat
14 Dec 14 04:14:45
Watchlist continued - $PETM $MIK $MELI - http://t.co/8vJ5Cj4EuG
spyia
14 Dec 14 03:26:30
RT @stockgoat: $MIK relative strength line breaking to new highs before price - http://t.co/eoSkScPYvA http://t.co/qonxIu9aPu
Stockgoat
14 Dec 14 03:25:34
$MIK relative strength line breaking to new highs before price - http://t.co/eoSkScPYvA http://t.co/qonxIu9aPu
Get R Dun
13 Dec 14 17:54:59
RT @IBDinvestors: Niche retailers stay nimble, turning mobile e-commerce into an opportunity http://t.co/4dhvtebywV $PETM $MIK $ULTA $AMZN …
Alex
13 Dec 14 14:30:13
RT @IBDinvestors: Niche retailers stay nimble, turning mobile e-commerce into an opportunity http://t.co/4dhvtebywV $PETM $MIK $ULTA $AMZN …
Henry R.
13 Dec 14 11:35:11
RT @IBDinvestors: Niche retailers stay nimble, turning mobile e-commerce into an opportunity http://t.co/4dhvtebywV $PETM $MIK $ULTA $AMZN …
Swing Trade Alert
13 Dec 14 09:27:00
IBD:Niche retailers stay nimble, turning mobile e-commerce into an opportunity http://t.co/zXoPR9Fovb $PETM $MIK $ULTA $AMZN $GNC
TheRealAlexCurry
13 Dec 14 09:03:14
RT @IBDinvestors: Niche retailers stay nimble, turning mobile e-commerce into an opportunity http://t.co/4dhvtebywV $PETM $MIK $ULTA $AMZN …
Investing Insight
13 Dec 14 08:51:00
IBDinvestors: Niche retailers stay nimble, turning mobile e-commerce into an opportunity http://t.co/YOz51sdeRG $PETM $MIK $ULTA $AMZN $GNC
Clare Market Invest
13 Dec 14 08:36:46
RT @IBDinvestors: Niche retailers stay nimble, turning mobile e-commerce into an opportunity http://t.co/4dhvtebywV $PETM $MIK $ULTA $AMZN …
Investors.com
13 Dec 14 08:35:07
Niche retailers stay nimble, turning mobile e-commerce into an opportunity http://t.co/4dhvtebywV $PETM $MIK $ULTA $AMZN $GNC
Stock Signaling
12 Dec 14 12:31:24
25 Stocks To Watch: http://t.co/S9oPUZ8PN3 : $DSX $YHOO $ABCO $SNSS $LLY $SPLS $MIK $BKW $UAL $RALY $AEC $LULU $BRCM $SGI $BMS #swingtrading
Kevin Klar
12 Dec 14 12:07:38
RT @StockSignaling: Upgraded Stocks Trading in a New Range: $INVE $GST $DSX $YHOO $CONE $ABCO $SNSS $LLY $SPLS $AR $BKW $MIK $UAL $RALY $AE…
Nick
12 Dec 14 11:48:02
RT @StockSignaling: Upgraded Stocks Trading in a New Range: $INVE $GST $DSX $YHOO $CONE $ABCO $SNSS $LLY $SPLS $AR $BKW $MIK $UAL $RALY $AE…
Stock Signaling
12 Dec 14 11:31:23
Upgraded Stocks Trading in a New Range: $INVE $GST $DSX $YHOO $CONE $ABCO $SNSS $LLY $SPLS $AR $BKW $MIK $UAL $RALY $AEC #finance #trader
Henry R.
12 Dec 14 00:36:40
RT @StockSignaling: Top Upgrades: $LLY $ABCO $GOL $SPLS $GST $IRET $JPM $GOLD $AR $UTIW $DOX $SGI $AEC $RALY $MIK http://t.co/S9oPUZ8PN3 #n…
Eric H.
12 Dec 14 00:36:36
RT @StockSignaling: 25 Stocks To Watch: http://t.co/S9oPUZ8PN3 : $ABCO $SNSS $LLY $SPLS $MIK $BKW $UAL $RALY $AEC $LULU $BRCM $SGI $BMS $DA…
				
				
By  +Follow June 26, 2014 3:34AM
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