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COMMERCE — Discount store operator 99 Cents Only Stores has received a proposal to take the company private from the company's founding family and investment firm Leonard Green & Partners LP for $19.09 per share.
The offer would value the company at about $1.3 billion.
But Wedbush analyst Joan Storms said in a client note that she believes the offer somewhat undervalues the company. She thinks there is the potential for a sweetened bid in an effort to ward off any possible competing offers.
Storms maintained a "Neutral" rating and raised 99 Cents Only's price target to $20 from $16.
The chain's stock surged $2.90, or 17.4 percent, to close at $19.58 Friday. The shares hit a fresh 52-week high of $19.97 earlier in the session.
99 Cents Only said Friday that the would-be acquirers include the Schiffer-Gold family, which owns about 33 percent of its outstanding stock.
David Gold co-founded 99 Cents Only with his wife, Sherry, and serves as its chairman. His son-in-law Eric Schiffer is CEO and his son Jeff Gold serves as president and chief operating officer. Another son, Howard Gold, has served as executive vice president of special projects since 2005, according to a regulatory filing.
Schiffer, David and Jeff Gold are board members. The board also includes Peter Woo, Eric Flamholtz, Marvin Holen and Lawrence Glascott.
In a letter sent to the company, the Schiffer-Gold family indicated that it is ready to contribute a "substantial portion" of its existing stock ownership as part of the proposed acquisition. The letter also says the family has not made any commitment of exclusivity with Leonard Green related to the proposal.
99 Cents Only said its board has yet to evaluate the proposal and that there is no guarantee a definitive offer will be made.
The Commerce, Calif., company said it expects to create a special committee comprised of independent board members to assess the bid.
Leonard Green has set its sights on retail buyouts recently. It was part of the $3 billion J. Crew Group Inc. buyout, along with TPG Capital, that closed on Monday. J. Crew and its CEO Mickey Drexler have a history with TPG, which took a majority stake in J. Crew in 1997 and remained majority shareholder until the preppy apparel retailer went public in 2006.
Leonard Green, which is based in Los Angeles, has also offered $1.6 billion for fabric and craft store chain Jo-Ann Stores Inc. and has reportedly expressed interest in buying warehouse club operator BJ's Wholesale Club Inc.
99 Cents Only currently runs 283 stores, with 210 stores in California, 34 in Texas, 27 in Arizona, and 12 in Nevada.
