The Canada Pension Plan Investment Board is betting on the future of dollar stores with the purchase today of 99 Cents Only Stores which announced it has entered into a definitive agreement to be acquired by CPPIB and Ares Management LLC for $22 per share in cash, in a transaction worth about US$1.6 billion.
The dollar store chain has been a hot property, pursued by at least two other rival offers. In March the chain received a proposal to be taken private by members of the Schiffer-Gold founding family and Leonard Green & Partners LP, in a deal valuing the company at $1.34 billion.
Torys LLP acted for CPPIB on the deal with a team that included lead partner Stefan Stauder, Peter Keenan, Jon Wiener, Andy Hope and Morgan Dann, all from the firms New York City office.
Industry experts say dollar stores have become takeover targets as they lure consumers who prefer quicker purchases and smaller stores compared to going to larger discount department stores when buying items such as toothpaste and packaged foods.
The dollar-store chain, led by chief executive officer Eric Schiffer, reportedly had $221.8 million in cash and marketable securities with no debt at the end of its fiscal first quarter.
Members of the Gold/Schiffer family who own the chain have entered into a voting agreement in support of the transaction and will continue to hold a significant minority ownership stake. Schiffer, president and chief operating officer Jeff Gold, and executive vice president Howard Gold will continue in their current leadership roles and serve as directors.
“We are pleased to be partnering with the Gold/Schiffer family and Ares in making this investment in 99 Cents Only Stores, which has a strong market position and attractive store economics in a growing retail sector,” said Andre Bourbonnais, senior vice president, private investments of CPPIB in a statement. “This investment is consistent with our strategy of investing alongside strong partners in an asset that we believe is well positioned for the long term and has shown good performance in various economic environments.”
Founded in 1982, 99 Cents Only Stores operates 289 retail stores in California, Texas, Arizona and Nevada. Over half of the company’s sales come from food and beverages, including produce, dairy, deli and frozen foods, along with organic and gourmet foods.