Another Retailer Going Private (JAS, JCG)

Fabrics and craft retailer Jo-Ann Stores Inc. (NYSE: JAS) has agreed to accept a buyout offer of $61.00 share from private equity firm Leonard Green & Partners that values the retailer at about $1.6 billion. Jo-Ann stores have until February 14th to seek a better offer. The offer from Leonard Green is expected to close in the first half of 2011.

Last month Green teamed with private equity firm TPG Capital to make a $3 billion offer for J. Crew Group, Inc. (NYSE: JCG). That deal has come under intense scrutiny since it was revealed that J. Crew’s CEO had unreported early contacts with representatives of Leonard Green and that TPG was given confidential information about J. Crew in September.

Recent interest in retailers is a little difficult to fathom. Retailing is, at best, a low-margin business that is very susceptible to changes in the economy. A fabrics and craft store like Jo-Ann could be seeing an uptick as the economy encourages people to make rather than buy clothing and other items for a home. But all the signs are that the economy is in for a boost in 2011, which should lower interest in sewing, although it could raise interest in craft hobbies like scrapbooking.

Jo-Ann’s CEO noted that going private would enable renovation of the stores and quicker expansion to increase market share. Maybe that will happen, but Jo-Ann is betting the ranch on it.

Jo-Ann Stores are seeing a jump in share prices of more than 30% on very heavy volume. Shares of J. Crew are also up marginally.

Paul Ausick