99 Cents Only Stores (NYSE:NDN) has inked a deal to be acquired by Ares Management and Canada Pension Plan Investment Board for $1.6 billion.
The bid is larger than the $1.3 billion offer 99 Cents said it had received from Los Angeles-based investment firm Leonard Green in March to take the company private. It had immediately denounced that deal, citing the price as too low.
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The Ares offer, valued at about $22 a share in cash, represents a premium of about 32% a share to 99 Cents' closing share price on March 10, the day before the Leonard proposal was initially made public.
For more than six months, a special committee formed by 99 Cents has been evaluating that proposal and other strategic alternatives. Following the review, the committee unanimously approved the transaction by Ares after determining it “is fair to and in the best interests of the company and its shareholders.”
The board subsequently approved the acquisition and recommended its shareholders do the same. Meanwhile, 99 Cent’s chief executive Eric Schiffer, its chief operating officer Jeff Gold and executive vice president Howard Gold, and their founding families, have entered into a voting agreement to support the deal.
Under the terms of the transaction, those executives will continue to hold a significant minority stake in the company and will maintain their current leadership roles. Founder David Gold will serve as chairman emeritus of the City of Commerce, Calif.-based company.
"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,” Schiffer said in a statement.
Senior partner and founding member of Ares Management, David Kaplan, said their investment will help the discount store expand and franchise. The private equity group has been responsible for driving capital growth at stores under its management including Serta & Simmons Bedding Company and Samsonite.
99 Cents was trading up about 4.5% pre-market to about $21.42 a share.