Party City, the party supplies retailer, is reportedly mulling a sale after a private equity firm reached out to the retailer.
According to a report in Reuters, citing people familiar with the matter, Party City is working with investment bankers on a potential sale, which is in the early stages. The report noted a sale, if it were to happen, would come two years after Thomas H. Lee Partners took Party City public. Party City’s sales have been doing well despite the movement to online shopping. Reuters noted Thomas H. Lee has a 55 percent stake in Party City while buyout firm Advent International owns a 19 percent stake. Party City has around $1.7 billion in debt as of the end of 2016, noted Reuters. In 2016 its net sales were $1.6 billion, marking a 1.2 percent increase from the year earlier. Same store sales decreased by 1.3 percent when excluding ecommerce sales.
Currently Party City has about 900 retail stores with about 20 percent of them franchises. It has been buying back its franchised stores in recent month including paying $31 million for 18 located in North and South Carolina. Since Party City is the leader in the party supply market it could draw suitor that argues Party City is being unfairly valued by public investors. Thomas H. Lee purchased its majority stake in Party City in 2012 from private equity firms Advent International, Berkshire Partners LLC and Weston Presidio for $2.7 billion, noted the report.
Last month Credit Suisse said in a report that Party City should buck the trends of other retailers because of its business model. The sell-side firm’s target price is $19, compared to a roughly $14 current price. Credit Suisse noted that “everyday business grew 3 percent” in the past year, “accelerating in the back half of the year as 3Q/4Q grew 3.5 percent and 3 percent, respectively.”