Apollo Global To Spend Over $11B Acquiring Craft Retailer Michaels, Sands Las Vegas Businesses
One of the biggest buyout firms in the world is throwing its weight around again.
Apollo Global Management has agreed to acquire craft retail chain Michaels for $5B in a transaction that values the company at $3.3B, The Michaels Co. announced in a press release. The transaction, executed by funds Apollo manages, will buy all outstanding shares of Michaels at $22 per share, taking the company private.
On the same day, Las Vegas Sands announced an agreement to sell its flagship Venetian Resort, built on the site of the casino that gave the company its name, as well as the neighboring Sands Expo and Convention Center. VICI Properties, the REIT that also owns the Caesar's Palace casino, will purchase the two properties for $4B in an all-cash transaction, while Apollo Global Management funds will acquire the operating businesses for $2.25B, the press release states.
The Michaels Co. will now enter a 25-day "go-shop" period wherein it can seek better offers, though it is far from a guarantee it will find one — the offer represents a 47% premium on what Michaels was trading for on the public market the day before Apollo's offer and a 78% premium on its 90-day weighted average price, according to the release.
Though Michaels suffered along with the rest of the retail industry when the initial outbreak of the coronavirus forced temporary closures at virtually all of its 1,272 stores, its recovery has been strong in the months since. Michaels sales in the third quarter increased 15% year-over-year as its online sales more than doubled, according to its quarterly Securities and Exchange Commission filing.
Michaels' success could be attributable to newly homebound consumers turning to arts and crafts as pastimes, CNBC reports. Apollo Global seems to be betting that economic recovery will offset the possible loss of such consumers as people feel more safe venturing outside with the accelerating vaccine rollout.
The retailer occupies all of its stores, distribution centers and corporate offices under lease agreements, which cost Michaels $440M over the first three quarters of 2020, according to its SEC filing. The chain claimed in its filing that it had secured $18M in rent abatements from retail landlords.
Las Vegas Sands
Simultaneous with closure of the sale, Apollo Global will enter into a triple-net lease agreement with VICI Properties for the Venetian Resort and the Sands Expo and Convention Center with a total annual rent of $250M, the press release states. Both buildings are core parts of the legacy of Sheldon Adelson, chairman and CEO of Las Vegas Sands Corp. until his death in January.
The Venetian contains over 6,000 hotel rooms across three towers, the tallest of which rises to 50 stories. The casino has 225K SF of gaming space, and the complex contains 1.1M SF of meeting and conference space that can be combined with the 1.2M SF Sands convention center, should an event ever require 2.3M SF of floor space.
The Venetian Resort will continue to move forward with plans for a new 400K SF entertainment venue in a partnership with Madison Square Garden Entertainment Corp. near the main building. The 18,000-seat venue, dubbed the MSG Sphere, is on target for completion in 2023.
Apollo Global's acquisition reflects its belief in a strong recovery for the gaming, hospitality and large event industries, Apollo partner Alex van Hoek told The Wall Street Journal. Of its $2.25B purchase price, $1.2B will come in the form of a loan with Las Vegas Sands, which will maintain its headquarters in Las Vegas despite turning the bulk of its focus to its casinos in Macau and Singapore, executives told the WSJ.
Apollo Global Management
Apollo has not been shy about using its considerable funds to bet on a widespread recovery from the coronavirus pandemic, both in the form of its acquisitions and with the $20B it sought to raise starting in May for giving out loans. Last month, the company announced $2B worth of loans for real estate transactions in London alone.
The flurry of activity from Apollo directly follows the resignation of CEO and co-founder Leon Black in late January over his deep financial ties to the late Jeffrey Epstein. An independent review that law firm Dechert conducted found no connection between Black and Epstein's laundry list of both proven and alleged sex crimes, but found Black had paid Epstein $158M from 2012 to 2017 for financial advice.
Due to Apollo's ownership structure, which the company vowed to change in the wake of Black's departure, its founders retained firm control of the investment firm's direction. By October, Apollo executives were made aware that some investors had paused their commitments due to Black's connection with Epstein. Black remains Apollo's chairman, and his fellow co-founder, Marc Rowan, succeeded him as CEO, NBC News reports.