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99 Cents Only Stores agrees to $1.6-billion buyout offer

99
99 Cents Only Stores Inc. has agreed to be taken private in a deal valued at about $1.6 billion, the City of Commerce deep-discount retailer said Tuesday, after months of talks with several groups interested in buying the company.

The chain said it had agreed to be acquired by Los Angeles private equity firm Ares Management and the Canada Pension Plan Investment Board for $22 a share in cash, a 7.4% premium to Monday's closing price of $20.49.

The price is also 32% higher than the stock's close on March 10, the day before it announced that it had received a $1.3-billion buyout proposal from Los Angeles investment firm Leonard Green & Partners and 99 Cents Only's founding family. The market viewed that $19.09-a-share bid as a lowball offer, and investors quickly pushed the stock above that level.

The company’s shares Tuesday morning were trading at $21.39, up 90 cents, or 4.4%, from Monday’s close.

99 Cents Only said the family of company founder David Gold had approved the Ares offer and would continue to hold a significant minority stake. Chief Executive Eric Schiffer, along with his brothers-in-law Jeff Gold, the company's president, and Howard Gold, executive vice president, would remain in their positions and serve as directors. David Gold would serve as chairman emeritus.

The deal also has been approved by the company's board and by a special committee set up to review all buyout proposals. If approved by shareholders, the transaction is expected to close in the first quarter of 2012.

The agreement "delivers significant value to our shareholders," Schiffer said in a company statement.

"We have come to know and respect Ares Management and CPPIB through this process and we believe they will be excellent partners and help us achieve our long-term goals as a company," he said.

Ares Management also has invested in such businesses as Samsonite, Serta, Simmons Bedding, General Nutrition Centers and Maidenform Brands. The Canada Pension Plan Investment Board invests retirement assets of 17 million Canadians.

"We believe that 99 Cents Only Stores is a franchise company and we look forward to working closely with the company's management team and dedicated employees to continue to expand the business in order to successfully increase the company's attractive market position," said David Kaplan, a senior partner and founding member of Ares Management.

Deep-discount chains have been seen as appealing takeover targets in recent years as consumers seeking low prices and convenience have flocked to their stores for household essentials. In the Los Angeles area, 99 Cents Only stores are often in better-located areas than competitors such as Wal-Mart Stores Inc., many of whose locations are in far-flung suburbs. More than half of 99 Cents Only's sales come from food and beverages.

Founded in 1982, 99 Cents Only was a pioneer of the single-price retail concept. It operates 289 stores in four states, most of them in California, and also has locations in Texas, Arizona and Nevada.

RELATED: 

99 Cents Only gets a $1.3-billion buyout offer

99-cent chain may not be able to buck inflation pressures

99 Cents Only shares jump after report of new takeover bid

-- Andrea Chang

Photo: A 99 Cents Only store in Los Angeles. Credit: Irfan Khan / Los Angeles Times

Shares of 99 Cents Only rose 90 cents, or 4.4%, to $21.39 at 8:23 a.m. Pacific time.

 
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