Capping off a year of buzz about a possible buyout, BJ's Wholesale Club Inc. has agreed to be acquired by units of private equity firms Leonard Green & Partners (LGP) and CVC Capital Partners in a $2.8 billion cash deal.


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BJ's Wholesale agrees to $2.8 billion takeover

June 29th, 2011

WESTBOROUGH, Mass. – Capping off a year of buzz about a possible buyout, BJ's Wholesale Club Inc. has agreed to be acquired by units of private equity firms Leonard Green & Partners (LGP) and CVC Capital Partners in a $2.8 billion cash deal.

BJ's said Wednesday that under the agreement, which will take the warehouse club chain private, shareholders will get $51.25 for each share of BJ's common stock they hold. That represents a 38% premium to the closing price of BJ's shares on June 30, 2010, the day before Leonard Green & Partners announced its 9.5% ownership stake in the company, and a 7% premium to the closing price of BJ's shares on June 28, 2011.

The retailer said its board voted unanimously in favor of the deal, which culminates a process that began in February when directors began exploring strategic alternatives for the company. The transaction, pending shareholder and regulatory approvals, is expected to close in the fourth quarter.

"BJ’s will benefit from the continued execution of our business plan and the significant retail expertise of our new partners at LGP and CVC, as well as from continued investments in our clubs, our people and technology, and the future of our business," Laura Sen, president and chief executive officer of BJ's, said in a statement. "Our members will continue to enjoy the top-quality merchandise, outstanding savings and great service that they've come to expect from BJ's on every visit."

Reports about a LGP-CVC takeover bid for BJ's surfaced earlier this month. Despite growing its business, BJ's sales growth has generally trailed that of market leader Costco Wholesale Corp. With 190 warehouse clubs in 15 states, BJ's also is a much smaller operator than Costco, which operates 581 warehouses, including 425 in the United States and Puerto Rico, 80 in Canada, 32 in Mexico, 22 in the United Kingdom and a combined 22 locations in Japan, Korea, Taiwan and Australia.

"We are very pleased to announce a transaction that provides our shareholders with excellent value and the certainty of a significant cash premium for their shares. Today's announcement is the result of a comprehensive process in which an independent committee of our board, with the assistance of its outside financial adviser, thoroughly explored and carefully considered alternatives to enhance value for our shareholders," stated Thomas Shields, lead director of BJ's board and chairman of the independent committee. "In connection with this process, CVC and LGP made a definitive offer to acquire BJ's, and this offer was fully negotiated by the company. BJ's board of directors believes that this transaction maximizes value and is in the best interests of our shareholders, employees and members."

Last July, LGP indicated that it was considering making a buyout offer for BJ's and acquired a 9.5% stake in the retailer. In a Securities and Exchange Commission filing, LGP stated that it believed the retailer's shares were undervalued and planned to contact management to discuss options, including taking the company private or finding additional financing. Then in November, published reports said BJ's was weighing plans to sell the company and had engaged Morgan Stanley to help set up an auction for the sale. Just a couple of months later, BJ's announced a management shakeup and plans to close some underperforming stores and restructure its home office and some field operations.

As of morning trading on Wednesday, BJ's stock price was up 4.7%, or $2.27, to $50.35 per share.

"BJ’s is the clear leader in the wholesale club industry in the eastern United States with strong brand equity and a proven and successful strategy," stated LGP partner Jonathan Seiffer. "We are pleased to partner with Laura and the management team and look forward to the next phase of the company's growth."

Commented Cameron Breitner, managing director of CVC, "We are delighted to work in partnership with the BJ's management team and our friends at LGP to support the continued growth of the company. With its leading market positions, outstanding value proposition and service, and valued employee base, BJ's is very well-positioned to extend its history of strong financial and operating performance."

LGP's retail investments include J. Crew, Jo-Ann Stores, Whole Foods Market, Neiman Marcus Group, PETCO, Leslie's Poolmart, The Sports Authority, The Container Store, Tourneau, David's Bridal, Jetro Cash & Carry and The Tire Rack. Current U.S. retail investments by CVC include Pilot Flying J and Leslie's Poolmart.

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