Ares Management, the Los Angeles–based buyout firm with an investment portfolio that includes Simmons
Ares and CPPIB together will pay $22 per share in cash for 99 Cents Only Stores, which rejected a $19.09-per-share bid from private equity buyer Leonard Green & Partners in March. The price being paid by Ares and CPPIB represents a 32 percent premium over the company's closing price on March 10, the day before the Leonard Green offer was revealed.
The deal is subject to shareholder approval and expected to close during the first quarter of 2012. Members of the Gold/Schiffer family, which founded the bargain retailer in 1982, have already voted in favor of the transaction, and will roll over their 33 percent minority ownership stake in the soon-to-be-private company, The New York Times reported. The family will continue to manage the company, with Eric Schiffer serving as chief executive officer and founder David Gold acting as chairman emeritus of the board of directors.
The agreement comes seven months after the Gold/Schiffer family and Leonard Green collaborated on an effort to take the retailer private. That $19.09-per-share bid was viewed by many as undervaluing the company and shareholders responded accordingly. An investor-backed class action alleged that 99 Cents had breached its fiduciary duties in accepting the offer.
The company's board responded to critics by creating a special committee of independent directors to run an auction in hopes of attracting a better price. Robery Cyran of Reuters BreakingViews (subscription required) said Tuesday that the approach adopted by 99 Cents Only Stores represented a welcome example of shareholder mollification that contrasts with how J. Crew's prolonged legal battles with shareholders played out earlier this year. J. Crew shareholders sued the company following the board of directors' November 2010 decision to sell to private investors. The suit kept the deal from becoming final until J. Crew and the buyers agreed to a $16 million settlement with the investor-plaintiffs in September.
While the 99 Cents Only Stores auction appears to have appeased many of the company's investors, some remain dissatisfied. A group of disgruntled shareholders has already filed a class action in California alleging that the company's board breached its fiduciary duties by agreeing to the proposed transaction. Citing certain analysts, the plaintiffs claim the board could have achieved a price as high as $24.50 per share.
Woronoff says he has been working on Ares transactional matters since joining Proskauer's Los Angeles office in 2004. Prior to that, he spent 15 years with Skadden, Arps, Slate, Meagher & Flom, followed by four years as a principal at investment fund Shelter Capital Partners. While at Shelter, he worked with David Kaplan, who is now a senior partner at Ares.
From 2002 to 2011, committed capital under Ares's management has swelled from $3 billion to $41 billion. Amid that growth, Woronoff says that his ties to Kaplan—combined with his history of representing such major investors as Apollo Global Management while at Skadden—have helped drive the expansion of Proskauer's transactional practice in Los Angeles, which has grown from three corporate attorneys in 2004 to nearly 30 today.
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