Baker Ahles & Kaskovich

December 22, 2013

Michaels files (again) for initial public offering of stock

The Irving-based parent company of Michaels Stores and Aaron Brothers arts and crafts stores was taken private in a $6 billion leveraged buyout in 2006 led by Bain Capital and The Blackstone Group.

Michaels, the arts and craft retail chain based in Irving, is making another run at going public, becoming the latest area retailer to unveil an exit strategy for its private equity owners.

Michaels Companies, a holding company formed earlier this year, filed registration papers with the Securities and Exchange Commission late Friday to sell shares to the public, worth as much as $500 million. Details on the timing and pricing of the offering will come later. The company said it intends the use proceeds to pay down debt.

Michaels, which operates 1,137 Michaels stores and 122 Aaron Brothers framing shops, was taken private by Bain Capital and The Blackstone Group in the summer of 2006 for $6 billion. The deal saddled the company, which had been essentially debt-free, with more than $3.7 billion in long-term debt. The company intended to go public last year but pulled back after its chief executive John Menzer suffered a stroke and was forced to step down. He was replaced by Chuck Rubin, who had been CEO at Ulta Beauty.

According to the SEC documents, Michaels earned $110 million in the first nine months of its 2013 fiscal year, up from $95 million the prior year, and sales increased by about 5 percent. The company has continued to grow and generate profits since the leveraged buyout, but growth slowed considerably as the economy fell into recession and the company faced steep interest payments.

Michaels is the latest retailer that was bought out in the spate of dealmaking that preceded the financial crisis to announce a cashout for its owners. Last month, The Container Store, based in Coppell, went public with a $225 million initial public offering, providing an exit for its owner Leonard Green & Partners, which acquired it in 2007.

And in September, upscale retailer Neiman Marcus, which was bought out in 2005 by TPG Capital and Warburg Pincus for $5.1 billion, said it would be sold to Ares Management and the Canadian Pension Plan Investment Board for $6 billion. Steve Kaskovich

Poll evenly split on American tail design

If our online poll is any indicator, picking a tail design for its newly-painted airplanes will be a very tough call at American Airlines.

Out of 1,240 votes cast at by Sunday, the choice between the traditional American eagle logo and the new American flag design was almost evenly split: 623 for the new flag and 617 for the eagle and old AA logo.

American’s new CEO Doug Parker, sensing internal controversy over the new tail design approved by the airline’s old management team, decided to put the choice to a vote among employees. Workers have until Jan. 2 to vote.

Looks like it’s going to be a nail-biter.

Blue Cross, HCA hospitals agree to contract

These deals always seems to come down the last minute.

Last week, Blue Cross Blue Shield of Texas and Hospital Corp. of America settled a months-long contract dispute that would have taken HCA facilities out of the insurer’s provider network. That would have meant hefty out-of-network fees for Blue Cross customers who used an HCA hospital.

Blue Cross is the largest health insurance company in Texas, dominating the market for individual and small group coverage.

In a statement last week, the companies said that after months of “determined efforts,” they reached a “multi-year agreement.” The previous contract was set to expire at year’s end.

Tarrant-area HCA properties include North Hills Medical Center, Medical Center of Arlington and Plaza Medical Center of Fort Worth, along with several others in North Texas. HCA has 39 Texas hospitals that would have been affected.

Gas-fired power saves water

In a study released last week, researchers at the University of Texas concluded that using natural gas to generate electricity instead of coal in the state saves water, even after including water used by hydraulic fracturing.

The most efficient natural gas-fired power plants, called combined-cycle, use about a third as much water as a comparably-sized coal-fired plant, said the study by the school's Bureau of Economic Geology. Less efficient gas-fired units called combustion turbines don’t use water at all, researchers said.

The study noted that water use for drilling would still have a disproportionate impact on the immediate location of a well and could strain local water supplies. But all in all, the state would have used 32 billion more gallons of water if all the state's natural gas-fired generators were coal-fired.

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