Private-equity firms Leonard Green & Partners and CVC Capital Partners said they will acquire BJ’s Wholesale Club for $2.8 billion in cash. The deal, which remains subject to shareholder approval and is expected to close during the fourth quarter, would be the sixth-largest U.S. retail transaction since 2006, according to data provider Dealogic.
BJ’s is the third-largest wholesale club retailer in the U.S., after Costco and Sam’s Club. The Westborough, Mass.–based chain, which posted $10.6 billion in sales last year, announced in February that it was seeking a buyer.
Leonard Green has some $9 billion in equity capital under management and holds stakes in several retail chains, including J. Crew, Neiman Marcus, The Container Store and Whole Foods Market. CVC has headquarters in London and Luxembourg and counts Pilot Travel Centers, the largest truck-stop chain in the U.S., and Grupo Cortefiel, Spain’s second-largest apparel retailer, among its holdings.
Analysts say they expect more such private equity retailer buyouts, given gains in the stock market, low interest rates and a growing comfort among lenders with high levels of leverage. “Twelve to 18 months ago, when the debt markets were first healing, the private equity firms for the most part would have had a tough time competing with a strategic acquirer,” said Glenn A. Carlin, co-head of Americas investment banking at CBRE Capital Advisors. “They could not get the level of debt that was needed in order to achieve their return-on-equity hurdles. But today the debt markets are in much better shape. Leverage levels are increasing, and that is certainly extending to retail deals as well.”BJ’s has 190 membership-based stores in 15 Eastern U.S. states.