Leonard Green, CVC Offer to Buy Warehouse Club Chain BJ’s

Leonard Green & Partners LP offered to buy warehouse-club operator BJ’s Wholesale Club Inc. (BJ), striving to add another chain to its growing list of retailers.

The buyout firm made the proposal with CVC Capital Partners, according to a regulatory filing today, which didn’t disclose the terms. Westborough, Massachusetts-based BJ’s began examining options in February, and Los Angeles-based Leonard Green expressed interest in a deal the next month.

Leonard Green has participated in at least five retail deals in the past year, which totaled almost $5 billion, compared with none the year before, according to data compiled by Bloomberg. BJ’s would give Leonard Green 190 wholesale clubs in 15 states across the U.S.

BJ’s Chief Executive Officer Laura Sen has reduced debt and curbed expenses as profit growth has trailed larger rival Costco Wholesale Corp. (COST) The buyout firms may see the potential to expand BJ’s outside its East Coast base and build the brand through more advertising spending, said Joseph Feldman, a retail analyst for Telsey Advisory Group in York.

“They could take it national,” said Feldman, who said a buyout price around $55 seemed reasonable. “There’s potential there.”

BJ’s shares fell 36 cents, or less than a percent, to $47.50 at 4:04 p.m. in New York Stock Exchange composite trading. The stock has gained 19 percent in the past year, compared with 36 percent for Costco.

Bid Estimate

The bid won’t be above $55 a share and may not be as high as $52 a share, DealReporter said today, citing two people close to the matter.

Cathy Maloney, a spokeswoman for BJ’s, declined to comment, as did Mary Zimmerman, a representative for CVC. A call to Los Angeles-based Leonard Green wasn’t returned.

In the past year, Leonard Green took part in the acquisitions of fabric seller Jo-Ann Stores Inc. (JAS) for $1.6 billion and apparel chain J. Crew Group Inc. for $2.6 billion. The firm, which manages about $9 billion, has had holdings in such retailers as Whole Foods Market Inc., the largest U.S. natural-goods grocer, and fitness-club operator Equinox, according to its website.

BJ’s has a market value of about $2.6 billion, ranking it behind Costco and Wal-Mart Stores Inc. (WMT)’s Sam’s Club. BJ’s became an independent, publicly traded company in 1997, according to an annual securities filing.

There have been more than 100 retail deals in North America in the past year with a combined value of about $27 billion, compared with $6.22 billion in the previous year.

BJ’S is a membership-based warehouse club offering food, household products, apparel, office equipment and gas. Zayre Corp., now known as TJX Cos., opened the first BJ’s in Medford, Massachusetts, in 1984, and named it after executive Mervin Weich’s wife, Barbara Jane, according to Hoovers Inc. BJ’s became part of Zayre’s Waban Inc. unit, which then spun off BJ’s in 1997.

To contact the reporters on this story: Matthew Townsend in New York at mtownsend9@bloomberg.net; Chris Burritt in New York at cburritt@bloomberg.net

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

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