Michaels finally set to go public, but Bain, Blackstone selling stake off slowly by Phil Wahba @FortuneMagazine June 16, 2014, 2:53 PM EDT E-mail Tweet Facebook Linkedin Share icons It’s been a long slog for arts and crafts retailer Michaels to get to the public markets. After the recession killed the IPO market’s appetite for retailers for several years, a stroke sidelined a former CEO John Menzer in 2012, soon after Michaels first filed to go public. After a devastating data breach in December, the company finally set the terms on Monday of its long-awaited IPO. The deal values Michaels at $3.8 billion, and shares are expected to start trading on Nasdaq on June 27. (It expects to sell 27.78 million shares for between $17 and $19 a pop, according to its latest IPO prospectus.) Michaels was one of the few major specialty retailers that managed to see revenue growth during the recession, and its hot streak has continued, with comparable sales rising 3.8% last quarter, while most stores struggled. It is also a cash machine: the retailer generated $2 billion in cash from operations between 2009 and 2013. Yet its owners, Bain Capital and Blackstone BX , which led a group that took Michaels’ private in 2006 and each hold about 46.5% of shares, pre-IPO, seem poised to take their time selling off their holdings, even though eight years is an eternity for a buyout firm to hang on to an investment. A third major investor, Highfields Capital Management, owns another 6.2%. The three will still collectively own 85.5% of shares after the IPO (83.4% if underwriters, led by J.P. Morgan JPM and Goldman Sachs GS exercise their option to buy shares from the selling stockholders). The relatively slow selloff is likely because of concerns Michaels’ debt load and slowing growth potential could curb demand for shares. By the company’s own admission, it is debt-laden ($3.7 billion in debt). The IPO is aimed at partially remedying that issue. Michaels will use the estimated $466 million in proceeds from the IPO to pay off notes it issued last year to finance a dividend for its owners. Michaels’ finances are not the offering’s only red flag. The retailer is only getting started in e-commerce, it still dealing with the fallout of the data breach, which involved 2.6 million customers and resulted in 5 class-action suits against Michaels, and is getting close to saturation—in its prospectus, Michaels said it believed there was room for 1,500 stores- it already has 1,150 or so namesake stores. What’s more, the $18 midpoint range for the IPO would give Michaels an price to earnings-per-share ratio of 19.9, which is rich compared to other speciality retailers, Francis Gaskins, an IPO expert and director of research at Equities.com, told Fortune. Given how many IPO’s have flopped this year, either because of aggressive pricing or a company floating too many shares to start, it is logical for Bain and Blackstone to go slowly to avoid a flop on June 27, especially if they want to sell off more of their Michaels shares later this year in secondary offerings. “They want to make sure they can do a secondary offering down the road. The IPO is just a toe in the water,” said Gaskins.