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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. To read our full disclosure, please go to: http://www.equities.com/disclaimer


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Results for MIK
StockNewsWires
1 Jul 15 20:24:04
$MIK: Insider Selling: Michaels Companies SVP Lance A. Weibye Sells ...: http://t.co/7Dhvs4FAeS
Dakota Financial
1 Jul 15 20:24:02
Insider Selling: Michaels Companies SVP Lance A. Weibye Sells 1,300 Shares of Stock $MIK http://t.co/C3aDgdo9e6
ARKRAILS
1 Jul 15 20:22:39
RT @TimeForGrowth: $MIK: Wall Street analysts bullish on MIK's earnings growth: http://t.co/8wXEhHjktW http://t.co/YqRuCtr6u9
Sleek Money
1 Jul 15 19:20:38
Michaels Companies SVP Sells $35,100.00 in Stock $MIK http://t.co/C8i2BnP3mb
Ticker Report
1 Jul 15 19:18:29
Michaels Companies SVP Sells $35,100.00 in Stock $MIK http://t.co/34GyGAjeSM
ProTradersNews
1 Jul 15 19:14:19
$MIK: Michaels Companies SVP Sells $35100.00 in Stock (MIK): http://t.co/IYdZoRwFLn
ARKRAILS
1 Jul 15 18:30:33
@OzarkTrades What about $MIK increasing revenue with upcoming same sex marriages?
SwingTradeBot
1 Jul 15 14:33:32
Scan results - 50 DMA Support today: $MKC $ENTG $PRIM $ZTS $SAGE $PEB $MYGN $RYN $TKC $MIK ... http://t.co/uXBhXlMIVl
TimeForGrowth
1 Jul 15 14:25:03
$MIK: Wall Street analysts bullish on MIK's earnings growth: http://t.co/8wXEhHjktW http://t.co/YqRuCtr6u9
Insider Alerts
1 Jul 15 13:49:16
NEW insider transaction on $MIK reported a moment ago: http://t.co/afh9nkh5EG
Ticker Report
1 Jul 15 08:41:38
Michaels Companies Receives Average Recommendation of “Buy” from Analysts $MIK http://t.co/Qt01q2L4iM
ARKRAILS
1 Jul 15 08:41:13
RT @SleekMoneycom: Michaels Companies Receives Average Recommendation of “Buy” from Analysts $MIK http://t.co/ALF0Uiqt2H
Sleek Money
1 Jul 15 08:35:45
Michaels Companies Receives Average Recommendation of “Buy” from Analysts $MIK http://t.co/ALF0Uiqt2H
ARKRAILS
1 Jul 15 08:03:11
RT @InvestWithConf: $MIK is rated BUY, 18.8% upside by Wall Street analysts based on average ratings/targets http://t.co/m0SqGhc8wL http://…
ARKRAILS
1 Jul 15 06:44:52
$MIK will increase revenue through thousands of same sex marriage ceremonies! Love the non-biased cake toppers!
ProVesting
1 Jul 15 00:29:10
$MIK: The Michaels Companies, Inc. (NASDAQ:MIK) Analyst Rating Update: http://t.co/rUNIStx4Ej
Stock_Huntress
30 Jun 15 23:22:06
http://t.co/aV04SGAiXY <-- In a few months this guy will likely be Super_trades 1st Millionaire student! $MGNX $MIK $XNCR $CALA
S Manian
30 Jun 15 16:39:29
RT @SwingTradeBot: Scan results - Bullish Engulfing today: $TU $CAG $MIK $BEL $AAVL $INCR $HOLI $HUBS ... http://t.co/DLMqCDfey4
SwingTradeBot
30 Jun 15 14:33:23
Scan results - Bullish Engulfing today: $TU $CAG $MIK $BEL $AAVL $INCR $HOLI $HUBS ... http://t.co/DLMqCDfey4
Capital Market Labs
30 Jun 15 14:25:52
$MIK Trade Card -> http://t.co/hQFpHyAIVx http://t.co/a8H83qreDb
InvestWithConf
30 Jun 15 08:13:02
$MIK is rated BUY, 18.8% upside by Wall Street analysts based on average ratings/targets http://t.co/m0SqGhc8wL http://t.co/qVKjhgxsAh
ProTradersNews
30 Jun 15 03:24:23
$MIK: Michaels Celebrates Summer Adventures: http://t.co/cRKXqNMofn
GNWLive
30 Jun 15 03:17:15
Michaels Celebrates Summer Adventures $MIK http://t.co/C4CpOw8EnD
Stock_Huntress
29 Jun 15 20:31:26
http://t.co/aV04SGAiXY <-- In a few months this guy will likely be Super_trades 1st Millionaire student! $MGNX $MIK $XNCR $CALA
Ophir Gottlieb
29 Jun 15 13:42:27
$MIK Trade Card -> http://t.co/5vgySjOnod
Penny Stock Secret
29 Jun 15 10:39:35
The Most Accurate Stock Alert Service Made $240,000 Yesterday http://t.co/NovWYe2RAx .. $MIK $UHAL $AFFX
Stock_Huntress
27 Jun 15 18:21:44
http://t.co/aV04SGAiXY <-- In a few months this guy will likely be Super_trades 1st Millionaire student! $MGNX $MIK $XNCR $CALA
dailystockplays.com
27 Jun 15 05:33:30
Enter Ichimoku http://t.co/XCLP5v49y3 $OPK $MRK $XLK $MHR $NBR $ABEV $MCD $BEE $EWG $DANG $NFX $XLP $IAG $SYRG $PAH $SSO $MIK $PES
SwingTradeBot
26 Jun 15 14:39:45
Scan results - Expansion Pivot Buy Setup today: $MIK $CLGX $OPK $MRC $SAH $GTLS $TWI $ELP $MCD ... http://t.co/ly0AmWxqHR
SwingTradeBot
26 Jun 15 14:30:41
Scan results - Crossed Above 50 DMA today: $MYGN $ROVI $CHS $MIK $CLGX $OPK $BIG $SAH $GTLS $TPC ... http://t.co/V7Iml4sG01
ARKRAILS
26 Jun 15 13:08:06
Same sex wedding investment play: $MIK The Michael's Company. Surely Hobby Lobby won't catch much of that business. #Congrats
Stock_Huntress
26 Jun 15 11:21:46
http://t.co/aV04SGAiXY <-- In a few months this guy will likely be Super_trades 1st Millionaire student! $MGNX $MIK $XNCR $CALA
StockReadBot
26 Jun 15 08:28:39
$MIK
Stock Trade Alerts
26 Jun 15 08:28:36
Price Action Alert $MIK - THE MICHAELS COMPANIES #stocks #intraday ~ via #AlertTrade
Stock_Huntress
25 Jun 15 14:36:06
http://t.co/aV04SGAiXY <-- In a few months this guy will likely be Super_trades 1st Millionaire student! $MGNX $MIK $XNCR $CALA
ProTradersNews
25 Jun 15 13:14:03
$MIK: Stock in Motion: The Michaels Companies, Inc. (NASDAQ:MIK): http://t.co/i2jTH7xzhb
Breaking News Now
25 Jun 15 11:14:03
$MIK: Earnings Watch: The Michaels Companies, Inc. (NASDAQ:MIK): http://t.co/cQJwiwYgVf
BNK Invest
25 Jun 15 08:58:12
Use Options For a Chance To Buy $MIK at a 17% Discount $GURU #stockoptions http://t.co/985nCJoaWg
Jason Olive
25 Jun 15 05:03:44
RT @SeekingAlpha: Revisiting The Container Store And The Michaels Companies http://t.co/D8LzZhrcWE $MIK $TCS
Breaking News Now
25 Jun 15 04:54:03
$TCS $MIK: Revisiting The Container Store And The Michaels Companies: http://t.co/53E3DGYKJn
Alysia Sarkisian
25 Jun 15 04:52:36
RT @SeekingAlpha: Revisiting The Container Store And The Michaels Companies http://t.co/D8LzZhrcWE $MIK $TCS
Quick Stock Ideas
25 Jun 15 04:48:25
Revisiting The Container Store And The Michaels Companies http://t.co/cY2X0m3TbQ $MIK $TCS
Seeking Alpha
25 Jun 15 04:48:24
Revisiting The Container Store And The Michaels Companies http://t.co/D8LzZhrcWE $MIK $TCS
StockNewsWires
25 Jun 15 04:19:02
$MIK: The Michaels Companies, Inc. Short Interest Update: http://t.co/Do5jTzVZTp
SwingTradeBot
24 Jun 15 14:34:41
Scan results - 50 DMA Resistance today: $PAH $ZMH $ELS $TMST $MIK $SCCO $FCX $UDR $BP $DF ... http://t.co/jMevW919WQ
Stock_Huntress
24 Jun 15 13:29:29
http://t.co/aV04SGRUmy <-- In a few months this guy will likely be Super_trades 1st Millionaire student! $MGNX $MIK $XNCR $CALA
Sleek Money
24 Jun 15 05:51:05
Michaels Companies SVP Sells $214,867.38 in Stock $MIK http://t.co/9Hq2tWqiKf
Battleflag
23 Jun 15 10:54:13
$mik - unable to fill gap down from 2 weeks ago - breakdown soon?
				
				
By  +Follow June 26, 2014 3:34AM
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