Ares Management, Canada Pension Plan To Pay $1.6 Bil. for 99 Cents

99 Cents Only Stores agreed to be acquired by affiliates of Ares Management LLC and Canada Pension Plan Investment Board for $20/share of common stock for a total value of $1.6 billion. Last March, private equity fund Leonard Green & Partners LP made a similar offer for $19.09/share. City of Commerce, CA-based 99 Cents Only Stores currently operates 289 extreme value retail stores consisting of 214 stores in California, 35 in Texas, 27 in Arizona, and 13 in Nevada. The company’s existing stores average 21,200 gross square feet, however, 99 Cents has been targeting new store locations between 15,000 and 19,000 gross square feet. Members of the Gold/Schiffer family voted to support the transaction and will continue to hold a significant minority ownership stake. Eric Schiffer (CEO), Jeff Gold (president and COO), and Howard Gold (executive vice president) will continue in their current leadership roles at the company and will serve as directors. Founder David Gold will serve as chairman emeritus. "We expect this transition to be a win-win for everyone as it delivers significant value to our shareholders," Schiffer told employees on announcing the deal. "It provides access to expertise to help us accelerate our growth, and helps ensure that we can continue to deliver extreme value to our customers and provide a great place to work for our 99ers. The news of this agreement should not be a distraction to any of us, as we do not contemplate any material change in the way the business is managed. It is business as usual." 99 Cents is required to pay a termination fee of $47.25 million if it terminates the merger agreement under certain circumstances. Ares and the Canada Pension Plan would have to pay a $94.5 million termination fee. The buyers have obtained equity financing commitments from Royal Bank of Canada, RBC Capital Markets, Bank of Montreal and BMO Capital Markets providing for a $150 million revolving credit facility, a $525 million term loan and a $250 million bridge facility (with the bridge facility to be funded through a private placement of non-convertible debt securities or a bank loan). The transaction is expected to close during the first quarter of calendar year 2012.