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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
Ticker Report
1 Sep 14 03:41:31
Macquarie Reaffirms “Neutral” Rating for Michaels Companies $MIK http://t.co/nfUi3Tf1Zn
InterCooler
1 Sep 14 03:35:12
Michaels Companies’s “Buy” Rating Reiterated at SunTrust $MIK http://t.co/s2DuPaxh0i
Tradespoon
29 Aug 14 12:05:09
Moody's upgrades the credit rating of Michaels Company $MIK
Perfor Mance
29 Aug 14 11:45:22
Option Millionaires: nlightn: $MIK,...Moody's ups its rating on Michaels http://t.co/zLLxXnLZOe
MarketCurrents
29 Aug 14 11:39:24
Moody's ups its rating on Michaels http://t.co/0VMYXPf0Uw $MIK
Stephens Inc
29 Aug 14 06:25:18
Morning Brief: Stephens releases research reports on $DAN $HLIT $MIK $OVTI $RALY $SIG $TIVO http://t.co/BTpMubiFs0 #SIResearch
Sleek Money
29 Aug 14 04:37:49
Michaels Companies Earns Neutral Rating from Macquarie $MIK http://t.co/s6v5trIibN
US_proptrader
28 Aug 14 11:37:58
$DGLY $IG $KITE $MIK $RIGP $XXII autocharts @ http://t.co/hj7PGeTQk3
James P Worthy
28 Aug 14 10:01:41
$MIK Wednesday's Hot Stocks: Express, Inc. (EXPR), Mobileye NV (MBLY), Michaels ... http://t.co/9xl1QfDX7J
FlashRatingsHOT
28 Aug 14 09:53:24
$MIK has 3 analyst ratings today. Median target: $17. View here: https://t.co/w7Sp7CLyJi
US Banking News
28 Aug 14 09:09:39
Michaels Companies’s Buy Rating Reaffirmed at SunTrust $MIK http://t.co/HsVHDeMkSh
US Banking News
28 Aug 14 08:34:49
Michaels Companies Stock Rating Reaffirmed by Macquarie $MIK http://t.co/ixELudI2EG
WKRB News
28 Aug 14 08:23:43
Michaels Companies Given Buy Rating at SunTrust $MIK http://t.co/6M4n9Osv9S
InterCooler
28 Aug 14 08:21:02
Michaels Companies’s “Neutral” Rating Reiterated at Macquarie $MIK http://t.co/rQf2rVDcFo
US_proptrader
28 Aug 14 08:14:03
$AKS $AXAS $DGLY $GALT $HPJ $JRJC $KITE $LEJU $MIK autocharts @ http://t.co/hj7PGeTQk3
US Consumer News
28 Aug 14 08:11:02
Michaels Companies's neutral rating reiterated at Macquarie. $17.00 PT. http://t.co/z6jujzuBqu $MIK #MIK
US Consumer News
28 Aug 14 08:10:58
Michaels Companies's buy rating reiterated at SunTrust. $22.00 PT. http://t.co/e0bF6tdKHy $MIK #MIK
Analyst Ratings
28 Aug 14 08:06:16
Michaels Companies's neutral rating reiterated at Macquarie. $17.00 PT. http://t.co/j6g6e9OAgt $MIK #MIK
Analyst Ratings
28 Aug 14 08:06:10
Michaels Companies's buy rating reiterated at SunTrust. $22.00 PT. http://t.co/F9pVWPEvuV $MIK #MIK
TipRanks
28 Aug 14 07:48:22
3-star analyst Denise Chai from Merrill Lynch reiterated a BUY rating on $MIK. http://t.co/2oOIAu8Dwm
Sleek Money
28 Aug 14 04:37:41
Michaels Companies $MIK Posts Quarterly Earnings, Beats Expectations By $0.07 EPS http://t.co/U7b30t3h28
Ticker Report
28 Aug 14 04:28:33
Michaels Companies Inc $MIK Updates FY15 Earnings Guidance http://t.co/yKfenl5EOZ
FonsieTrader
28 Aug 14 04:20:34
Moved Upper Bollinger Band 1/2 $ARO $BBD $BBRY $BSBR $CIM $DDD $ETAK $LVLT $MBT $MIK $NOV http://t.co/cfRX4BeY6V
SIAnalystWire
28 Aug 14 04:02:59
The Michaels Companies $MIK Lifted to $24 at BofA/Merrill Lynch on Solid Q2 Results http://t.co/kTZzNclI2n
Edward Gofsky
27 Aug 14 21:25:44
RT @361Capital: Roses in the Market Today: $TLT $XLU $EWZ $EWC $EXPR $MIK $KLIC $BBY $SPLS $WFM http://t.co/bEloxgddk8
Jesus Cryptos
27 Aug 14 20:12:18
RT @Bidnessetc: Michael beat estimates for both revenue and earnings, and provided positive outlook for the full fiscal year http://t.co/OF…
Bidness Etc
27 Aug 14 20:00:13
Michael beat estimates for both revenue and earnings, and provided positive outlook for the full fiscal year http://t.co/OFbTneI8G4 $MIK
buylowsellhigh
27 Aug 14 18:52:54
RT @stocktrackerale: After Hour Movers: $MRVSY 23.22(31.86%) $CREG 1.65(18.71%) $AHCLF 42.30(12.66%) $SLH 67.17(12.08%) $MIK 16.70(10.30%)
Sani YorkGoldenblatt
27 Aug 14 14:41:28
RT @AlertTrade: After Hour Movers: $MRVSY 23.22(31.86%) $CREG 1.65(18.71%) $AHCLF 42.30(12.66%) $SLH 67.17(12.08%) $MIK... via http://t.co/…
Richard Bailey
27 Aug 14 14:24:52
RT @AlertTrade: After Hour Movers: $MRVSY 23.22(31.86%) $CREG 1.65(18.71%) $AHCLF 42.30(12.66%) $SLH 67.17(12.08%) $MIK... via http://t.co/…
Day Trade Alerts
27 Aug 14 14:08:35
After Hour Movers: $MRVSY 23.22(31.86%) $CREG 1.65(18.71%) $AHCLF 42.30(12.66%) $SLH 67.17(12.08%) $MIK... via http://t.co/VS8RO1bzXJ
stocktrackeralert
27 Aug 14 14:00:53
After Hour Movers: $MRVSY 23.22(31.86%) $CREG 1.65(18.71%) $AHCLF 42.30(12.66%) $SLH 67.17(12.08%) $MIK 16.70(10.30%)
361 Capital
27 Aug 14 13:55:53
Roses in the Market Today: $TLT $XLU $EWZ $EWC $EXPR $MIK $KLIC $BBY $SPLS $WFM http://t.co/bEloxgddk8
US_proptrader
27 Aug 14 12:27:13
$ACRX $BDSI $EXAS $GLUU $MIK $PVA autocharts @ http://t.co/hj7PGeTQk3
Vetr
27 Aug 14 11:30:16
Michaels’ shares are painting a pretty picture $MIK http://t.co/5Pgy5JAbRp
US Banking News
27 Aug 14 11:22:02
Michaels Companies Sees Unusually-High Trading Volume After Strong Earnings $MIK http://t.co/3vBkjYOsNr
WKRB News
27 Aug 14 11:10:51
Michaels Companies Sees Unusually-High Trading Volume After Strong Earnings $MIK http://t.co/PaZmPEoQWO
Swing Trade Alerts
27 Aug 14 11:00:24
THEFLYNEWS:$FB $GOOG $MIK $SWHC $RGR $EXPR On The Fly: Midday Wrap: Full Story http://t.co/UFYSIlmVjn
US_proptrader
27 Aug 14 10:54:16
$ACRX $FOLD $HZNP $MBLY $MIK $OWW $RENN $TKMR autocharts @ http://t.co/hj7PGeTQk3
Bidness Etc
27 Aug 14 10:44:16
Michaels Soars on upbeat earnings, strong guidance http://t.co/KEpYXo7jsi $MIK
US_proptrader
27 Aug 14 10:17:17
$AEGR $MACK $MBLY $MIK $NPSP $OREX $TKMR $TSL autocharts @ http://t.co/hj7PGeTQk3
CBOE
27 Aug 14 10:08:28
CBOE Mid-Day Update 8.27.14 $CHS $EXPR $MIK #VIX http://t.co/uzc0vhJGsC
Gillian Rich
27 Aug 14 09:14:04
Michaels Crafts Q2 Beat In First Earnings Since IPO $MIK http://t.co/plrL7hEXIc
Day Trade Alerts
27 Aug 14 09:08:39
RT @theflynews: $FB $GOOG $MIK $SWHC $RGR $EXPR On The Fly: Midday Wrap: Full Story http://t.co/GLiE3f1BP8
The Fly
27 Aug 14 09:07:33
$FB $GOOG $MIK $SWHC $RGR $EXPR On The Fly: Midday Wrap: Full Story http://t.co/GLiE3f1BP8
Hot Stock Minute
27 Aug 14 09:05:09
Michaels is up more than 9% after full-year guidance was better than analysts expected. http://t.co/iikctZCN2U $MIK
US_proptrader
27 Aug 14 09:00:15
$BDSI $KITE $MIK $NKTR $OREX $TKMR $WLT $YGE autocharts @ http://t.co/hj7PGeTQk3
Stock Wars
27 Aug 14 09:00:01
U.S. Gainers: $OIBR +9.36%, $MIK +7.26%, $MBLY +7.05%, $ANET +6.21%, http://t.co/iKxPnk4TjS #StockWars
The Fly
27 Aug 14 08:30:15
$MIK Michaels rallies after earnings beat in first report since IPO: Full Story http://t.co/Clh48XsEMy
US_proptrader
27 Aug 14 08:12:16
$CLDX $FOLD $GLUU $KERX $KITE $MIK $OWW $SPWR $TSL autocharts @ http://t.co/hj7PGeTQk3
				
				
By  +Follow June 26, 2014 3:34AM
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