BJ’s Shareholder Leonard Green to Study Possible Takeover

BJ’s Wholesale Club Inc. (BJ) shareholder Leonard Green & Partners said it’s considering making an offer for the U.S. membership warehouse chain, reviving its overtures after BJ’s began looking for suitors.

The retailer and the investor reached a confidentiality agreement yesterday as part of a possible transaction, according to a U.S. regulatory filing today. Leonard Green agreed to provisions restricting it from purchasing additional BJ stock for a year.

Laura Sen, president and chief executive officer of BJ’s, is adding smaller-format stores and has said the company is capturing market share. BJ’s, which operated 189 stores as of Jan. 29, has a stock-market value of $2.64 billion and had sales of $10.9 billion in its fiscal year ended Jan. 29.

The Westborough, Massachusetts-based warehouse chain in February said its board had decided to explore strategic options, including a possible sale as investor buyouts of retail and consumer companies rebounded along with consumer spending. BJ’s hired Morgan Stanley in November after receiving an offer from Leonard Green, a Los Angeles-based private-equity firm, three people with knowledge of the matter said at the time.

BJ’s, the third-largest U.S. warehouse chain after Costco Wholesale Corp. (COST) and Wal-Mart Stores Inc.’s Sam’s Club, carries a heavier mix of groceries than its two larger competitors and more directly targets consumers over small businesses, said Joe Feldman, an analyst with Telsey Advisory Group LLC in New York.

Expanding the Base

“If you’re able to grow the store base a little and enhance the operations a little bit, that’s where the value would come,” said Feldman, who doesn’t rate companies.

The company rose $2.32, or 5 percent, to $48.84 at 4 p.m. in New York Stock Exchange composite trading. The shares are up 2 percent this year.

Leonard Green owned 3.9 percent of the company as of March 21, or 9.3 percent including options to buy shares as of October, according to its regulatory filing today.

BJ’s, which is concentrated on the Eastern seaboard, could spread west in addition to opening more stores in existing markets, Feldman said, speaking in a telephone interview.

Earlier this month BJ’s forecast first-quarter profit of as much as 58 cents a share, exceeding analysts’ estimates, after it raised membership fees.

To contact the reporters on this story: Lauren Coleman-Lochner in New York at llochner@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net;

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