Novice Investing - Michael is On Sale

Date: Monday 01st 2008f December 2008 04:28:46 PM

Michael is On Sale - 03/21/2006

By: Novice Investing Staff

Michael Stores Inc. (MIK) has just put itself on sale. The longtime Chief Executive, Michael Rouleau, is retiring and the company is exploring strategic alternative, including a possible sale. Unlike its competitors, Michael Stores has grown earning consistently over the past five years. So, this company is not in trouble in any way.

A glance at Michael Stores show a market capitalization of $ 5.13 Billion (after the news release) which, may be steep for some companies to acquire. Meanwhile, Michael's competitors are valued at much less than Michael. Jo-Ann Stores Inc. (JAS) has a market cap of $ 304.80 M, AC Moore Arts (ACMR) is valued at $ 337.29 M and Hancock Fabrics Inc. (HKF) is valued at a mere $ 67.56 M. Granted, Michael has a solid balance sheet and a better financial performance, acquirers might as well buy Michael's competitors and compete against Michael with a lower price tag.

Here is the rationale. If one can afford $ 5.13 Billion, acquirers can buy all of Jo-Ann, AC Moore and Hancock Fabricks while still having some money left to open lots of new stores. In the meantime, buyers can consolidate all these stores to achieve better operational efficiency and compete against Michaels.

Of course, not all buyers will agree with what is being said here. That is why Michael will probably be bought at a price tag of $ 5 Billion or more. That is fine. Whenever there are buyers, there will be sellers. You just have to know which side you are on.



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Disclaimer: The sole purpose of this article is educational. This article is merely the opinion of the writer and is not in any way a buy/sell recommendation regarding Michael Stores Inc. (MIK) or any other securities.

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