99 Cents Only Accepts $1.6B Private Buyout

JON SPRINGER

CITY OF COMMERCE, Calif. — 99 Cents Only Stores here said last week that it had agreed to be acquired by a consortium of private investors led by Ares Management and the Canada Pension Plan Investment Board, along with its family majority owners.

The cash offer of $22 per share, or $1.6 billion, trumps a $1.4 billion buyout offer proposed in March by the Schiffer/Gold family and Leonard Green & Partners. That offer resulted in the formation of a special committee to explore investment options that led to the Ares/CPPIB deal, the company said. The deal requires the approval of shareholders and is expected to close early next year.

99 Cents Only operates 289 extreme-value stores in California, Texas, Arizona and Nevada and posted annual sales of $1.4 billion in the fiscal year ended April 2. More than half of 99 Cents Only sales are from food and beverages.

Eric Schiffer, chief executive officer of 99 Cents Only; Jeff Gold, its president and chief operating officer; and Howard Gold, its executive vice president, will retain their current roles and board positions. Founder David Gold will continue to serve as chairman emeritus. The Schiffer/Gold family owns around 33% of the company.

“We expect this transition to be a win-win for everyone as it delivers significant value to our shareholders, it provides access to expertise to help us accelerate our growth, and helps ensure that we can continue to deliver extreme value to our customers and provide a great place to work for our 99ers,” Schiffer said in a memo distributed to 99 Cents employees last week.

Ares Management, Los Angeles, typically invests in middle-market companies in need of growth capital. Its other investments include General Nutrition Centers, Maidenform Brands, Floor and Décor Outlets of America, Samsonite and Serta & Simmons Bedding. CPPIB, Toronto, invests on behalf of the Canada Pension Plan.

Statements from both Ares and CPPIB indicate the deal would provide financing to facilitate organic expansion for the retailer. With a relatively strong market position in California, growing sales amid continuing economic slowness and no debt, the chain was particularly attractive to investors, sources noted.

The acquisition of 99 Cents follows the privatization of BJ's Wholesale Club, whose sale to Leonard Green & Partners was completed last month.

The company's most recent financial statement in August showed a 5.9% comparable-store sales gain during the first quarter and a profit margin of 40.4% of sales. The company was looking to expand through the addition of 16 new stores during the fiscal year — most in California — with further growth anticipated for 2013.