Party City Holdco Inc (PRTY.N), a U.S. retailer of party supplies such as balloons and costumes, is exploring a sale after being approached by a private equity firm about a leveraged buyout, people familiar with the matter said on Thursday.
A sale would come two years after buyout firm Thomas H. Lee Partners LP took the company public. Since then, Party City's sales have proven resilient despite the increasing popularity of internet shopping. Thomas H. Lee owns 55 percent of Party City, while Advent International LP, another buyout firm, owns 19 percent.
Party City shares were up 9.5 percent at $16.15 on Thursday afternoon, boosting the company's market capitalization to nearly $2 billion. Party City had $1.7 billion in debt as of the end of December.
Party City is working with investment bankers on a sale process, which is still in an early stage, said the sources, who asked not to be identified because the sale process is confidential.
Party City did not respond to a request for comment. News service Dealreporter first reported on the sale process on Wednesday evening, citing anonymous sources.
The Rockaway, New Jersey-based retailer has more than 900 stores, roughly 20 percent of which are franchised. It has recently been buying back its franchise stores, including 18 in the Carolinas for $31 million.
Like office supplies retailer Staples Inc (SPLS.O), which is also exploring a sale amid sliding shares, Party City is the largest retailer in its niche. That may entice buyers who believe the retail chain is unfairly valued by public market investors.
Party City's retail net sales in 2016 were $1.6 billion, up 1.2 percent year-on-year. Excluding the impact of e-commerce, same-store sales decreased by 1.3 percent.
Thomas H. Lee acquired a majority stake in Party City in 2012 from private equity peers Advent International, Berkshire Partners LLC and Weston Presidio in a $2.7 billion deal.
(Reporting by Lauren Hirsch in New York; Editing by Matthew Lewis)