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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
Sleek Money
28 Aug 15 04:51:06
Michaels Companies Inc $MIK Updates Q3 Earnings Guidance http://t.co/8LkXP70XXq
Sleek Money
28 Aug 15 04:34:13
Michaels Companies $MIK Posts Earnings Results, Beats Expectations By $0.01 EPS http://t.co/Mlf0HX77zc
WKRB News
27 Aug 15 22:49:19
Michaels Companies Sees Large Volume Increase After Earnings Beat $MIK http://t.co/r2dMJ8Vl07
ARKRAILS
27 Aug 15 21:23:23
$MIK price update!! http://t.co/WrWC7XUt1o
Stock_Huntress
27 Aug 15 19:30:51
http://t.co/aV04SGAiXY <-- In a few months this guy will likely be Super_trades 1st Millionaire student! $MGNX $MIK $XNCR $CALA
StockNewsWires
27 Aug 15 18:07:02
$DG $MIK: Business Watch: http://t.co/Escp1kulxZ
ARKRAILS
27 Aug 15 16:25:03
RT @SleekMoneycom: Zacks Upgrades Michaels Companies to Buy $MIK http://t.co/xP3mPMS8A9
SwingTradeBot
27 Aug 15 15:04:19
Scan results - 50 DMA Resistance today: $SNN $MIK $SUI $CALD $SSS $NATI $CSOD $FRT $XLNX $BYD ... http://t.co/9fOkHicKWf
StockNewsWires
27 Aug 15 13:22:02
$MIK: Michaels (MIK) Stock Rose After Releasing Second Quarter Earnings: http://t.co/WS9Bcve7lT
TheStreet Retail
27 Aug 15 13:21:04
Michaels $MIK Stock Rose After Releasing Second Quarter Earnings http://t.co/r75Gtl3mN4
Trader Daily
27 Aug 15 13:14:34
Michaels $MIK Stock Rose After Releasing Second Quarter Earnings http://t.co/8qeEQcuJVV
TheStreet SpeedDesk
27 Aug 15 13:14:34
Michaels $MIK Stock Rose After Releasing Second Quarter Earnings http://t.co/t2dL0tcWG9
WKRB News
27 Aug 15 12:52:28
Michaels Companies Stock Rating Reaffirmed by SunTrust $MIK http://t.co/JwqPkmjzj7
Sleek Money
27 Aug 15 12:21:21
Zacks Upgrades Michaels Companies to Buy $MIK http://t.co/xP3mPMS8A9
Daily Contracts
27 Aug 15 11:10:03
Real-Time feed of company contracts, original agreements and executive updates from $MIK http://t.co/sVkawA8bSH
Sleek Money
27 Aug 15 11:04:26
Michaels Companies Sees Strong Trading Volume on Better-Than-Expected Earnings $MIK http://t.co/ZwG3r7KabP
Dakota Financial
27 Aug 15 10:39:12
Michaels Companies Sees Unusually-High Trading Volume After Earnings Beat $MIK http://t.co/fqZigVR1n6
billsatterwhite
27 Aug 15 08:20:42
RT @DallasBizNews: .@MichaelsStores posts $35.7M profit in Q2 after a loss the previous year $MIK http://t.co/nh0DJxowmv http://t.co/LlcrAx…
Lance Murray
27 Aug 15 08:09:50
RT @DallasBizNews: .@MichaelsStores posts $35.7M profit in Q2 after a loss the previous year $MIK http://t.co/nh0DJxowmv http://t.co/LlcrAx…
Lance Murray
27 Aug 15 08:09:46
RT @DallasBizNews: .@MichaelsStores posts $35.7M profit in Q2 after a loss the previous year $MIK http://t.co/nh0DJxowmv http://t.co/LlcrAx…
Dallas Biz Journal
27 Aug 15 08:09:42
.@MichaelsStores posts $35.7M profit in Q2 after a loss the previous year $MIK http://t.co/nh0DJxowmv http://t.co/LlcrAxuAZP
NewsHedge Squawk
27 Aug 15 07:44:51
$MIK Rolling over on normal trading volumes. http://t.co/RxVPfH1XZI
DMN Business
27 Aug 15 07:43:44
RT @MariaHalkias: Arts and crafts retailer Michaels improves profit, sales increase $MIK | @DMNbiz http://t.co/nPxxVwlW3o http://t.co/m4xF5…
Sleek Money
27 Aug 15 07:06:34
Michaels Companies Inc $MIK Releases FY16 Earnings Guidance http://t.co/ItihCAWynZ
Sleek Money
27 Aug 15 07:06:34
Michaels Companies Inc $MIK Issues Q3 Earnings Guidance http://t.co/57YOKvyCSD
US Banking News
27 Aug 15 06:35:31
Michaels Companies Inc $MIK Updates FY16 Earnings Guidance http://t.co/syYSEfWgM5
US Banking News
27 Aug 15 06:35:31
Michaels Companies Inc $MIK Updates Q3 Earnings Guidance http://t.co/WcKkU0yD4N
Seeking Alpha
27 Aug 15 06:32:37
More on The Michaels Companies' Q2 http://t.co/McXJbH5NU3 $MIK
Consumer Stocks
27 Aug 15 06:32:37
More on The Michaels Companies' Q2 http://t.co/9VEpvK1E4W $MIK
Stocks On The Move
27 Aug 15 06:32:36
More on The Michaels Companies' Q2 http://t.co/jYWy7zBrEz $MIK
Breaking News
27 Aug 15 06:32:36
More on The Michaels Companies' Q2 http://t.co/NNdfbDZ5uE $MIK
Ticker Report
27 Aug 15 06:27:34
Michaels Companies Inc $MIK Updates FY16 Earnings Guidance http://t.co/jRqs6EGEWa
Ticker Report
27 Aug 15 06:27:34
Michaels Companies Inc $MIK Updates Q3 Earnings Guidance http://t.co/ef3m7bk37S
Dakota Financial
27 Aug 15 06:25:13
Michaels Companies Inc $MIK Updates FY16 Earnings Guidance http://t.co/r0YMXldN78
Dakota Financial
27 Aug 15 06:25:13
Michaels Companies Inc $MIK Updates Q3 Earnings Guidance http://t.co/MCMhfK5FyB
Robert Diaz
27 Aug 15 06:20:35
RT @YahooFinance: Early movers: $TIF, $SJM, $DG, $MIK, $CSX, $TSLA & more http://t.co/weDNmGrFZ3
Barron's Stocks Blog
27 Aug 15 06:15:13
Barron's Morning Movers: Seadrill Jumps on Earnings; Tiffany Tumbles http://t.co/3G7Xxxr5ao via @barronsonline $SDRL $TIF $WSM $MIK $ANF
Christina Silaen
27 Aug 15 06:10:49
RT @YahooFinance: Early movers: $TIF, $SJM, $DG, $MIK, $CSX, $TSLA & more http://t.co/weDNmGrFZ3
Pristine Trading
27 Aug 15 06:03:14
ESP Gap Up: $AVGO $BURL $MIK $NQ $PSEC $PVH $SCTY $SDRL $SIG $SJM $YNDX ESP Gap Down: $DG $GES $TIF $VNET $WDAY $WSM
moha.mmeddki88557474
27 Aug 15 05:52:12
#news RT YahooFinance: Early movers: $TIF, $SJM, $DG, $MIK, $CSX, $TSLA & more http://t.co/5bXpMXwZGE
Consumer News
27 Aug 15 05:49:14
Michaels Companies Inc updates FY16 guidance to $1.66-1.72 EPS. http://t.co/6pA8VETShH $MIK #MIK
US Banking News
27 Aug 15 05:49:14
Michaels Companies Inc updates FY16 guidance to $1.66-1.72 EPS. http://t.co/8icMSP3b68 $MIK #MIK
Consumer News
27 Aug 15 05:49:14
Michaels Companies Inc updates Q3 guidance to $0.35-0.37 EPS. http://t.co/fqbq3r6Hho $MIK #MIK
US Banking News
27 Aug 15 05:49:13
Michaels Companies Inc updates Q3 guidance to $0.35-0.37 EPS. http://t.co/ajHjynfzZb $MIK #MIK
DARK CORPZ
27 Aug 15 05:48:41
RT @YahooFinance: Early movers: $TIF, $SJM, $DG, $MIK, $CSX, $TSLA & more http://t.co/weDNmGrFZ3
Juneau Patrice
27 Aug 15 05:44:05
RT YahooFinance: Early movers: $TIF, $SJM, $DG, $MIK, $CSX, $TSLA & more http://t.co/5r5MUfkuMr
Yahoo News
27 Aug 15 05:39:00
RT @YahooFinance: Early movers: $TIF, $SJM, $DG, $MIK, $CSX, $TSLA & more http://t.co/weDNmGrFZ3
Snake
27 Aug 15 05:32:24
RT @YahooFinance: Early movers: $TIF, $SJM, $DG, $MIK, $CSX, $TSLA & more http://t.co/weDNmGrFZ3
DR JAMES CABOT
27 Aug 15 05:32:11
RT @WrigleyTom: Early movers: $TIF, $SJM, $DG, $MIK, $CSX, $TSLA $STJ $GES $PVH $WSM $GPS $WMT $AXP $BAC $V $MA $DISH $WDAY http://t.co/…
Tom Wrigley
27 Aug 15 05:27:59
Early movers: $TIF, $SJM, $DG, $MIK, $CSX, $TSLA $STJ $GES $PVH $WSM $GPS $WMT $AXP $BAC $V $MA $DISH $WDAY http://t.co/TNJYRsPsHD
				
				
By  +Follow June 26, 2014 3:34AM
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