BJ’s Wholesale Club Inc. (BJ) is now becoming a wait and watch story keeping the market guessing about the future prospects of the company.
Going by the Associated Press, Leonard Green & Partners and CVC Capital Partners are expected to make a joint takeover bid for the company offering a value of $2.8 billion. It is anticipated that both Leonard Green & Partners and CVC Capital Partners will announce its offer in the coming week.
The buyout story was taken positively as the shares of BJ’s closed at $48.52, up 1.72% from the previous close on Wednesday.
However, the company has not released any formal statement regarding the explicit actions on the sale of the company or any other possibilities.
Earlier Story
Following the recommendation given by the committee of autonomous directors in February 2011, BJ’s announced that it is looking for strategic choices, which might include a possible sale of the company.
The leading warehouse club operator, which faces intense competition from Costco Wholesale Corporation (COST), had hired Morgan Stanley to guide the autonomous committee during the evaluation process.
It is not the first time that the private equity player Leonard Green has offered to acquire the wholesale-club chain. Back in November 2010, the company made a buyout offer to BJ’s, however nothing substantial had come out at that point of time.
Leonard Green currently holds around 9.5% stake in the company. If the firm moves ahead with its plan, the acquisition of BJ’s will be the latest in its string of buyouts.
What’s in for the Bidders?
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.
Moreover, BJ’s continued investments in Club payroll and Club remodels facilitates the company to augment the sales of perishable items, which have been the driving factor, and have helped in increasing sales, improving traffic counts and gaining market share.
Further, as a warehouse club, BJ’s is uniquely positioned to drive traffic as it provides wider assortments of brands at compelling prices and offers its customers the choice of bulk or consumer-friendly package sizes.
Currently, we prefer to maintain long-term ‘Neutral’ recommendation on the stock. Moreover, BJ’s 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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