June 28, 2018 / 3:05 PM / 9 months ago

BJ's Wholesale Club shares shine in return to public market

(Reuters) - Shares of BJ’s Wholesale Club Holdings (BJ.N) jumped 26.5 percent on their market debut on Thursday, giving the company a valuation of $2.72 billion.

The wholesale retailer sold 37.5 million shares in its IPO, raising net proceeds of $637.5 million which it intends to use to primarily repay debt.

The company’s shares opened at $21.25, over its pricing of $17 a share.

BJ’s Wholesale Club, which has 215 warehouses spanning 16 states, closely competes with Costco Wholesale (COST.O) and Sam’s Club, a unit of Walmart Inc (WMT.N).

The company was taken private by equity firms Leonard Green & Partners LP and CVC Capital in 2011 for $2.8 billion.

Currently, CVC and Green Equity each own 34.5 percent stake in the company.

The Westborough, Massachusetts-headquartered company recorded net sales of $12.50 billion for fiscal year 2018, up 3.3 percent from FY ended 2017. Total net income was $50.3 million, up 13.7 percent from an year earlier.

BJ’s IPO will be the second retail listing in 2018 after airport concession operator Hudson Ltd (HUD.N) and comes at a time when brick and mortar retailers are struggling as consumers spend more of their dollars online.

Warehouse club operators, however, have largely bucked the downturn as their business models rely more on recurring membership revenues than just top line sales.

BJ's Wholesale Club said it had over five million paid members, as of Feb 3. In comparison, Costco had nearly 51 million paid members as of May 13, 2018, according to a filing bit.ly/2KdyvDc with the U.S. Securities and Exchange Commission.

Bank of America, Deutsche Bank, Goldman Sachs and JP Morgan are leading a 14-firm underwriting syndicate for the retailer’s IPO.

Reporting by Diptendu Lahiri and Aparajita Saxena in Bengaluru; Editing by Shailesh Kuber

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