Value of 99 Cents Only Could Be on the Way Up

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It looks like 99 Cents Only Stores could be worth more after all.

Potential interest from New York private-equity firm Apollo Global Management could push the price of the Commerce discount retailer above that of a current buyout offer, analysts said.

The Schiffer and Gold families that run the company, and West L.A.’s Leonard Green & Partners offered $1.34 billion – or $19.09 a share – in March to take 99 Cents private.

James Ragan, an analyst with Crowell Weedon & Co. in Los Angeles, said a competitive bid from Apollo, which announced its interest in 99 Cents on July 6, could drive up that offering price.

“I don’t believe there would be a big chance of the Leonard Green group raising their bid without another party,” he said. “There’s a higher likelihood of a higher price now with another party involved.”

Shareholders have spoken out in opposition to the Leonard Green offer. The company’s largest shareholder, FBR Capital Markets, which controls 5.5 percent of the shares, wrote a letter to the board in May stating that the special committee reviewing the offer should not accept a per-share bid below a range of $21.75 to $23.50.

The company’s shares have been trading about a dollar above the Leonard Green offer since it was announced, illustrating market belief that the company is worth more.

Apollo announced it was “officially pursuing” the company after 99 Cents requested notification of interest from potential bidders, but has not announced a formal offer or price.

Apollo did not respond to a request for comment.

Brian Macauley, a portfolio manager for FBR Capital in Arlington, Va., said there are other firms believed to have interest in the company.

The Schiffers and Golds, who own about 33 percent of 99 Cents’ shares, include co-founder and Chairman David Gold and his son-in-law Eric Schiffer, the company’s chief executive. The Schiffer-Gold group plans to contribute a “substantial portion” of its stock as part of the Leonard Green deal but is not obligated to do so.

Ragan said any competitive offer that emerges would not get far without support from the Schiffer-Gold team.

“I don’t think they’d agree to sell if they weren’t involved. They need to get the Gold family behind them,” he said.

Meanwhile, the company announced July 14 sales revenue of $368 million for the quarter ended July 2, up 6.3 percent from the same quarter last year. The company will report full financial results for the quarter in August.

Leonard Green and 99 Cents did not respond to requests for comment for this article.