Leonard Green Reports 4.8% Stake In 99 Cents Only Stores

Leonard Green & Partners LP late Wednesday disclosed a 4.8% stake in 99 Cents Only Stores (NDN), the discount chain of stores it proposed to take private with the aid of the company's founding family late last week.

Green has been on an acquisitive streak in retail of late, recently completing its buy of clothier J. Crew. The private equity firm bought just under 3.4 million shares of 99 Cents Only between June and August last year, paying $51.7 million, or an average price of about $15.34 apiece.

Green and the Schiffer/Gold family, which includes 99 Cents Only Chairman David Gold and his son-in-law, Chief Executive Erik Schiffer, have proposed buying the company Gold and his wife founded for $19.09 a share, or about $1.37 billion in total. The Schiffer/Gold family together own roughly a third of 99 Cents Only.

The Schiffer/Gold family would contribute its equity to the proposed deal, and its stake in the chain would be enlarged.

The price for the chain of nearly 300 stores tops by 2 cents a share its October high and represented the highest level since 2004, but Wall Street promptly bid the stock higher, and it closed Wednesday at $19.52.

According to a filing with the Securities and Exchange Commission, Green entered into a confidentiality agreement with the company on Jan. 27 in order obtain information it needed to evaluate the transaction with the Schiffer/Gold family. With the agreement, Green agreed not to acquire any shares of the company for 18 months without permission from the company.

On Friday, investor FBR Capital Markets, which owns 5.4% of 99 Cents Only, issued a filing to say it believes the proposed deal "substantially" undervalues the company. FBR said it would "closely monitor the company's response to the transaction proposal" to make sure the special committee of the 99 Cents Only board of directors that is evaluating the proposal is "a truly independent special committee that acts at all times in a manner consistent with the fiduciary duties owed by the board to the company's shareholders."

-By Maxwell Murphy, Dow Jones Newswires; 212-416-2171; [e-mail]