According to Bloomberg, Leonard Green & Partners in a strategic move is considering to acquire BJ’s Wholesale Club Inc. (BJ).
Earlier, BJ’s announced that it is looking for strategic choices, which might include a possible sale of the company. The company had hired Morgan Stanley to guide the autonomous committee during the evaluation process.
The story in Brief
BJ’s recently reached confidentiality conformity with the private-equity player through which the buyout firm will have access to the financials of the company for making a fair evaluation. Meanwhile, Leonard Green, the largest shareholder of the company with a 9.3% stake, agreed to restrict itself from acquiring any additional shares of the company for a year.
It is not the first time that the private equity player Leonard Green has offered to acquire the wholesale-club chain. Earlier, it offered a buyout proposal to the company in November 2010. Further, if the firm moves ahead with its plan, the acquisition of BJ’s will be the latest in its string of buyouts, which includes Jo Ann Stores and upscale apparel retailer J. Crew.
For the bidders, BJ’s offers a striking prospect for acquisition as it has a healthy balance sheet with modest debt and offers an opening to a sturdy food and grocery market that is gaining ground.
However, the company did not make any statements regarding the explicit actions pertaining to the sale of the company or in any other possibilities.
Our View
As a warehouse club, BJ’s is uniquely positioned to drive traffic as it offers wider assortments of brands at compelling prices and provides its customers the choice of bulk or consumer-friendly package sizes.
BJ’s Wholesale will sustain its investments in Club payroll and Club remodels to augment the sales of perishable items, which have been the driving factor, and have helped increase sales, improve traffic counts and gain market share.
However, we believe that a sluggish economic recovery and a weak consumer spending environment could intensify the competition, as supermarket stores and other warehouse club operators offer compelling prices to lure consumers
Currently, we have a long-term ‘Neutral’ rating on the stock. Moreover, BJ’s Wholesale, which faces stiff competition from Costco Wholesale Corporation (COST), holds a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating.
BJ’S WHOLESALE (BJ): Free Stock Analysis Report
COSTCO WHOLE CP (COST): Free Stock Analysis Report
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