BJ’s to be sold for $2.8 billion

By Jenn Abelson, Globe Staff

BJ’s Wholesale Club Inc., the Westborough-based retail chain, said today that it has agreed to be bought by Leonard Green & Partners LP and funds advised by CVC Capital Partners in an all-cash transaction valued at about $2.8 billion.

Leonard Green and CVC Capital Partners are private equity firms.

Under the agreement, BJ’s shareholders will receive $51.25 per share in cash for each share of BJ’s common stock they hold, representing a 38 percent premium to the closing price of BJ’s shares on June 30, 2010. That was the day before Leonard Green announced its 9.5 percent ownership stake in the company, BJ’s said in a press release.

The proposed purchase price represents a roughly 7 percent premium to the closing price of BJ’s shares yesterday.

“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,” BJ’s chief executive Laura Sen 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.”

The move was not unexpected. In February, BJ’s said it was considering selling the company - after an earlier announcement that it would close five stores and cut about 500 jobs - and hired Morgan Stanley to offer advice on a possible deal. And earlier this month in a Securities and Exchange filing, Leonard Green and CVC said that they had joined to make an offer to purchase BJ’s.

Retail analysts have said that taking the company private would allow BJ’s to expand beyond the Northeast and Southeast -- its core markets -- without financial pressure from Wall Street.

BJ’s, with 190 warehouse clubs in 15 states, is the smallest of the club chains, competing against two larger rivals Costco Wholesale Corp. and Sam’s Club, a chain operated by Wal-Mart Stores Inc.

“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,”  Jonathan Seiffer of Leonard Green Partners said in a statement.

Leonard Green, based in Los Angeles, is a leading private equity firm with over $9 billion of equity capital under management, including current retail investments in J. Crew, Jo-Ann Stores, Neiman Marcus Group, PETCO Animal Supplies, and The Container Store.

CVC is currently investing from funds with an aggregate of over $10 billion in available equity capital, with current retail investments in Pilot Flying J and Leslie’s Poolmart.

Last month, BJ’s Wholesale said its first-quarter profit jumped 29 percent as food and gasoline sales rose. It reported net income of $33.7 million, or 62 cents per share, in the three months that ended April 30, which beat its forecast of 54 to 58 cents per share. Revenue climbed 10 percent to $2.83 billion. Much of that increase was a result of higher gasoline prices.