Leonard Green, CVC to submit bid for BJ's Wholesale

BANGALORE Fri Jun 17, 2011 10:44am EDT

Shoppers leave a BJ's store in Alexandria Virginia August 20, 2008. REUTERS/Kevin Lamarque

Shoppers leave a BJ's store in Alexandria Virginia August 20, 2008.

Credit: Reuters/Kevin Lamarque

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BANGALORE (Reuters) - Private equity firm Leonard Green & Partners said it has teamed up with CVC Capital Partners to bid for BJ's Wholesale Club Inc BJ.N, the latest in a flurry of deal activity in discount retail.

Leonard Green and its affiliates, which also reported a 9.3 percent stake in the retailer in a regulatory filing, however, did not disclose the financial terms of the proposal.

The news comes after the New York Post reported last week, citing sources, that the two firms could make a joint buyout offer for BJ's Wholesale valuing the retailer at about $2.8 billion.

"A deal makes sense, BJ's do need to remove themselves from the public market to expand on the East Coast," Wall Street Strategies analyst Brian Sozzi told Reuters.

The Westborough, Massachusetts-based company's shares rose 3 percent to $49.40 in Friday morning trading on the New York Stock Exchange.

"I can make a case the valuation could be close to $57-$58 a share. You realistically could see that price. And that would be a very good price," Sozzi added. At the upper end, Sozzi's estimate values the company at about $3.2 billion.

There has been a lot of private equity interest in the company after its board decided to explore a sale and other alternatives in February. Apollo Global Management LLC (APO.N) was also reported to be eyeing the company.

BJ's declined to comment on the matter, saying it will not provide any update until it concludes its strategic review. Leonard Green and CVC Capital Partners could not be immediately reached for comment.

A deal would be the latest in Leonard Green's retail buying spree. The private equity firm, which already owns Jo Ann Stores Inc and upscale apparel retailer J. Crew, has partnered with the Schiffer-Gold family to bid for 99 Cents Only Stores NDN.N.

Cheap valuations and extensive real estate assets have made discount and dollar stores attractive targets for other players and private equity firms.

BJ's Wholesale is the third-largest wholesale club retailer behind Costco Wholesale Corp (COST.O) and Sam's Club, a unit of Wal-Mart Stores Inc (WMT.N).

Wholesale clubs charge customers a membership fee, in return for which they can shop for deals on large quantities of everyday items like food and toilet paper.

In March, Leonard Green & Partners said it was evaluating whether to buy BJ's and had entered into a confidentiality agreement with the company.

(Reporting by Viraj Nair in Bangalore; Editing by Saumyadeb Chakrabarty, Sriraj Kalluvila)

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