Retailer Agrees to Buyout

Burlington Coat Factory Warehouse Corp. said Wednesday that it had agreed to be bought by affiliates of private equity firm Bain Capital Partners for $45.50 a share in cash, or about $2.06 billion.

The deal marks another retail industry buyout by private equity investors, who are attracted by the industry’s real estate portfolios and the prospect of turning around underperforming companies and selling them at a premium.

Private equity firms often target family-controlled firms that are tired of being publicly traded and believe they are under-appreciated by investors.

Burlington Coat appears to fit that mold. It has received scant Wall Street analyst coverage in recent years and saw its shares stuck in the $20 range throughout 2003 and 2004, while the broad market surged.

The Milstein family, the founders of Burlington Coat Factory, own a substantial portion of the firm’s outstanding shares.

The company said in June that it had hired investment bank Goldman Sachs Group Inc. to help it explore ways to boost shareholder value. Investors anticipated a buyout and sent Burlington shares up 16% to $42 on the day of the Goldman Sachs announcement.

In recent days the shares hit record highs on rumors of a pending buyout. The stock fell 45 cents to $44.13 on Wednesday, after the news.

“I think that they reached the point where something had to happen to Burlington Coat. [Chief Executive] Monroe Milstein was not active for quite some time, and I think it was mostly his sons running the company,” retail industry analyst Kurt Barnard said. “I think his sons were running out of ideas. They weren’t expanding, and they felt it would be too much of an effort to make the company shape up and be competitive.”

The Burlington, N.J.-based company operates about 360 stores in more than 40 states.

Bain Capital said it had obtained commitments from members of the Milstein family and affiliated entities representing about 62% of the current shares outstanding to vote in favor of the deal.