* Offer price at 34 pct premium to Wednesday's close
* Transaction to close by first half of 2011
* Says can solicit other bids till Feb 14
* Shares up 33 percent (Recasts; adds details, updates share move)
BANGALORE, Dec 23 (Reuters) - Fabric and crafts retailer Jo-Ann Stores Inc JAS.N agreed to be bought by an affiliate of private-equity firm Leonard Green & Partners L.P for about $1.6 billion in cash, the latest in a flurry of deals in the retail sector.
Leonard Green's offer at $61 per share is at a premium of 34 percent to Jo-Ann's close on Wednesday.
In November, Leonard Green, along with the TPG Group, offered to buy retailer J Crew Group Inc JCG.N for $2.86 billion.
Going private would help Jo-Ann speed up its expansion and store upgradation plans, leading to market share gains, chief executive Darrell Webb said in a statement.
Jo-Ann, which competes with A.C. Moore Arts & Crafts Inc ACMR.O and privately held Michaels Stores, was not actively seeking a transaction, the company's lead director Scott Cowen said in a statement.
The Hudson, Ohio-based Jo-Ann has been topping Wall Street estimates in recent quarters. It's shares had gained about 34 percent till Wednesday, since falling to a low of $34 last December.
The retail sector has seen a slew of private equity deals recently as buyout firms have been under pressure to spend money before their investment periods end.
Childrens apparel retailer Gymboree Corp GYMB.O was taken private recently, and there have been reports of possible private equity interest in Build-A-Bear (BBW.N) and Aeropostale Inc (ARO.N). [ID:nSGE69A16C]
Jo-Ann sells merchandise used in sewing, crafting and home decorating projects.
The deal is expected to close in the first half of 2011. The company can solicit alternative proposals through February 14.
Centerview Partners and J.P. Morgan are serving as financial advisers and Sullivan & Cromwell LLP and Thompson Hine LLP as legal advisers to Jo-Ann Stores.
Shares of Jo-Ann were up 33 percent at $60.5 Thursday morning on the New York Stock Exchange. (Reporting by NR Sethuraman in Bangalore; Editing by Don Sebastian, Prem Udayabhanu)