99 Cents Stores Being Taken Over for $1.6 Billion

October 12 00:00 2011

New York, October 12 (RainbowNewsLine.com) – The deep-discount 99 Cents Only Stores are being taken over by L.A. private equity firm Ares Management and the Canada Pension Plan Investment Board in a $1.6-billion buyout deal. The investors are planning to expand the chain beyond its Western base and wish to take advantage of their growing popularity, especially in the present difficult economic situation. They will buy the retailer’s shares for $22 a share in cash at a premium of 7.4% over Monday’s closing price of $20.49.

The current family management team will however remain as before. On Tuesday, the company’s shares went up 90 cents, or 4.4%, to $21.39. Investors also backed its competitors, Chesapeake, Va.-based Dollar Tree Inc. that rose 1.2% to $80.26, and Goodlettsville, Tenn.-based Dollar General Corp. that went up 1.6% to $39.07.

In recent years, deep-discount stores have been very popular with consumers for household essentials because of low prices and convenience. Matt Arnold, an analyst at Edward Jones & Co. said that “There’s been tons of chatter for some time about takeovers for various dollar stores,” and added that “In many instances, they can offer good returns.”

99 Cents, like its competitors, profited immensely as the recession pushed consumers towards them to avail of better bargains. It is expected that the discount chain will open additional stores and expand into more states.