Continuing a streak of retail acquisitions, Los Angeles buyout firm Leonard Green & Partners has agreed to take over BJ’s Wholesale Club Inc. with another private equity firm in a roughly $2.8-billion deal.
BJ’s, which in February announced that it was exploring a sale, said Wednesday that Leonard Green and CVC Capital Partners would pay $51.25 per share in cash for BJ’s common stock, a 6.6% premium over Tuesday’s closing price of $48.08.
The deal could help BJ’s, a predominantly East Coast warehouse chain, grow a bigger presence nationally, analysts said.
It is currently the third-largest U.S. wholesale club behind Costco Wholesale Corp. and Wal-Mart Stores Inc.'s Sam’s Club, but the chain has only 190 stores in 15 states, none in California.
“Leonard Green undoubtedly played its hand very well with this one,” said Brian Sozzi, an equity research analyst at Wall Street Strategies, in a note to investors.
Sozzi called the purchase price “somewhat lowball” but said the sale process appeared thorough.
He said Leonard Green had the potential “to bring BJ’s back to the public markets at a higher price than what it paid today, as it’s likely to expand the brand outside of the East Coast and possibly internationally.”
Leonard Green has been on an aggressive spending spree in recent months. In March it helped take J.Crew Group Inc. private and also made a bid for City of Commerce-based 99 Cents Only Stores Inc., and in December the firm announced that it had agreed to buy fabric and crafts chain Jo-Ann Stores Inc.
It also has investments in Whole Foods Market Inc., Neiman Marcus Group, Petco Animal Supplies Inc., Sports Authority Inc., Container Store Inc. and David’s Bridal.
BJ’s Chief Executive Laura Sen said the chain would benefit from the “significant retail expertise” of Leonard Green and CVC.
BJ’s, based in Westborough, Mass., said its board of directors had unanimously approved the agreement and recommended that all BJ’s shareholders vote in favor of the deal. The transaction is expected to close during the fourth quarter.
Shares of BJ’s rose $2.21, or 4.6%, to $50.29 on Wednesday.