May 9 (Bloomberg) -- Bed Bath & Beyond Inc., the operator of more than 1,000 home-furnishings stores, agreed to buy Cost Plus Inc. for about $495 million in cash to add its World Market and Cost Plus Imports chains.
The offer of about $22 a share will be funded with available cash, the companies said today in a statement. The companies expect the deal to be completed in Bed Bath & Beyond’s fiscal second quarter and add “slightly” to earnings in the current year. The offer is 22 percent higher than Cost Plus’s $17.99 closing price yesterday.
The deal would give Bed Bath & Beyond, which operates 1,173 locations in 50 states, 259 new stores while also adding another e-commerce platform as it competes with retailers ranging from Amazon.com Inc. to Target Corp. Demand at Cost Plus stores has surged as consumers increase home-related spending amid the housing market recovery, said Bradley Thomas, an analyst for Keybanc Capital Markets Inc. in New York.
“They got the company at a great price,” Thomas said in a telephone interview. Cost plus was one of the fastest-growing companies in the home-goods retail industry, and has the potential to become more profitable and double its locations, said Thomas, who recommends holding Bed Bath & Beyond shares and buying Cost Plus.
Bed Bath & Beyond, based in Union, New Jersey, fell 0.3 percent to $68.02 at the close in New York. Shares of Cost Plus, based in Oakland, California, increased 22 percent to $21.93 after gaining 85 percent this year through yesterday.
Revenue from Cost Plus locations open at least 14 months rose 5.4 percent last year. So-called same-store sales, a key metric for a retailer’s growth because new and closed stores are excluded, gained 5.9 percent at Bed Bath & Beyond last year. Cost Plus had revenue of $963.8 million last year, compared to $9.5 billion at Bed Bath & Beyond in the period.
The companies had already been working together on testing Cost Plus products in Bed Bath & Beyond through a so-called store-in-store concept. Cost Plus offers a different shopping experience than Bed Bath & Beyond because it sends product buyers around the world to create a more diverse assortment, Thomas said.
The deal may add about 15 cents to earnings per share in Bed Bath & Beyond’s next fiscal year, Thomas said.
Cost Plus’s two largest shareholders, Red Mountain Capital Partners LLC and Stephens Holdings LLC, agreed to support the deal, according to the statement.
Goldman Sachs Group Inc. is advising Bed Bath & Beyond and Peter J. Solomon Co. is serving in that role for Cost Plus.
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