A party worth $2.7 billion? Thomas H. Lee gets down

Slumping stocks, rising unemployment and a European crisis: Does such a depressing cocktail make consumers feel more or less inclined to party? Would you pay $2.7 billion to find out?

That’s what private equity firm Thomas H. Lee Partners essentially agreed to do Tuesday, buying a majority stake in Party City Holdings Inc.

The shindig supplier, founded in 1947, leads a party goods industry worth $10 billion, according to Boston-based THL. Party City has products in more than 40,000 retail outlets worldwide, 825 brick-and-mortar party superstores and more than 400 temporary Halloween pop-up shops each year.

The company had filed a prospectus more than a year ago for an initial public offering, aiming to raise roughly $350 million. But given Facebook Inc.’s floundering debut and turmoil in the markets, staying private may have seemed a safer option for Party City.

Meanwhile, THL has kept busy taking in such companies, saying last month that it planned to buy the Fogo de Chao Churrascaria for $400 million.

Party City’s current owners, private equity firms Berkshire Partners, Advent International and Weston Presidio, will hold minority stakes. Berkshire and Weston bought Party City in 2005 for $364 million.

But consider the sour economic news of late – shaky consumer confidence, poor job growth and more – and remaining reluctance among some party-throwers and goers to let loose. Is it a good bet to invest so heavily in a company focused on the good times?

The IPO filings show that Party City’s revenue soared 17% to $1.85 billion last year. Its net income spiked 54.6% to $76.4 million.

The New York-based company says its domestic store network is 15 times larger than its next party superstore competitor. Over time, it plans to open another 400 Party City stores in North America.

Same-store sales rose 8.7% in 2011, including a 88.7% boom in online sales due to a revamp of its website in 2009.

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