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Nearly five months after BJ's Wholesale Club’s board said it would consider selling the company, Leonard Green & Partners LP and CVC Capital Partners have made an offer for the Westborough, Mass.-based retailer, according to published reports. The amount the private equity firms would pay for BJ's wasn’t disclosed, but the warehouse club operator could ask for $53 to $57 a share, based on valuations of rival retailers and the price Leonard Green agreed to pay for 99 Cents Only Stores in March, financial news agency Bloomberg said.
According to Bloomberg, BJ's equity is worth less per dollar of sales than any U.S. discount retailer, but a deal could result in a 33 percent gain for its owners, as BJ’s has more cash than debt and the industry's lowest operating margins. Private equity firms are interested in buying the retailer so they can make a profit by reducing costs, raise food and fuel prices, and use the company's cash flow to expand the banner beyond its current Northeast footprint, Bloomberg noted.
BJ’s, CVC in London and Leonard Green in Los Angeles have declined to comment on the potential deal.
The company has gained 10 percent since revealing in February that its board had decided to look into strategic options, Bloomberg reported. BJ's is less successful than its chief competitors, Costco and Wal-Mart Stores Inc.'s Sam's Club, because it has fewer locations nationally and stocks more items, an analyst told Bloomberg.