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Business & Tech

Jo-Ann Stores Expected to Be Sold

Shareholders still have to approve sale to private equity firm

The announcement that a private equity firm has proposed to buy the Jo-Ann Stores retail chain did not surprise one employee who worked at the Mentor Jo-Ann location for several years.

"We just heard about it (acquisition) today, but it was not a surprise because we knew it was on the sale block," said an employee Thursday. She declined to give her name and referred calls to Jo-Ann Stores corporate headquarters in Hudson.

 The Jo-Ann store at Mentor's Erie Commons has operated for about 25 years. There are 746 Jo-Ann stores in 48 states, including 21 throughout Northeast Ohio.  Jo-Ann Stores is the nation's largest specialty retailer of fabrics and one of the largest specialty retailers of crafts.

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Jo-Ann Stores board of directors unanimously approved the sale of the northeast Ohio-based, publicly traded retail chain on Thursday to Leonard Green & Partners for $1.6 billion or $61 per share in cash. Leonard Green & Partners is a Los Angeles-based private equity firm

The board of directors earlier appointed a special committee to review the acquisition proposal.

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"After a thorough assessment, the Special Committee and the board of directors concluded that the proposal put forth by Leonard Green & Partners is the best way to maximize value for shareholders, who will receive a substantial and immediate cash premium for their shares," said Scott Cowen, lead director and chairman of the Special Committee. "While the company was not actively seeking this transaction, once the offer was received and negotiated, the Special Committee determined that is was in the best interest of the company's shareholders, as well as its employees and other partners."

Leonard Green & Partners manages more than $9 billion in equity capital with significant investments in other major retail chains such as Whole Foods Market, PETCO Animal Supplies, The Container Store, Neiman Marcus Group and Tourneau.

Although it is uncertain how the acquisition will affect the Mentor store operations and others throughout Northeast Ohio, Todd Purdy of Leonard Green & Partners said, "We are excited to partner with Jo-Ann Stores' talented management team and look forward to the next phase of the company's growth."

The acquisition needs final approval from Jo-Ann Stores shareholders. Apparently, some shareholders have concerns about the proposed sale. A few hours after the Jo-Ann Stores acquisition was announced at 8 a.m. yesterday, at least five law firms from New York, Dallas and Wilmington, Del., issued statements saying they are investigating the acquisition proposal.

"The investigation concerns whether the Jo-Ann Stores Board of Directors breached their fiduciary duties to Jo-Ann Stores stockholders by failing to adequately shop the company before entering into this transaction and whether Leonard Green is underpaying for J-Ann Stores shares, thus unlawfully harming Jo-Ann Stores stockholders," according to a statement released by Levi & Korsinsky LLP, a New York-based law firm.

Nevertheless, the acquisition price offer made by Leonard Green & Partners of $61 per share in cash represents a 34 percent premium to the closing price of Jo-Ann's shares on Dec. 22.

Shareholders are expected to vote on the acquisition proposal during the first half of 2011. If the deal is approved, it means Jo-Ann Stores will become a private company. However, Jo-Ann Stores board of directors has until Feb. 14, 2011 to solicit other proposals, according to the acquisition agreement.  

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