BJ’s completes $2.8 billion deal

Wholesaler expected to expand away from Wall Street pressure

June 30, 2011|By Jenn Abelson, Globe Staff

Shoppers will get the same quality and service, BJs says. (Associated Press file )

BJ’s Wholesale Club Inc. plans to go private after reaching a $2.8 billion deal yesterday that is expected to transform the East Coast discount chain into a national player without pressure from Wall Street.

In a deal that was widely expected, the Westborough company will be taken over by two private equity firms, Leonard Green & Partners and CVC Capital Partners. Leonard Green, of California, already has retail investments in companies such as J. Crew, Petco Animal Supplies, and Whole Foods Market.

“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.’’

Sen owns shares, options, and equity grants worth at least $14 million if the sale is completed. Kelly McFalls, a BJ’s spokeswoman, said the new owners have expressed interest in keeping the current management team and avoiding job cuts. BJ’s, founded in 1984, has 4,229 Massachusetts employees at its headquarters and in stores.

The deal requires shareholder approval and is expected to close by the fourth quarter. It offers investors $51.25 per share, roughly a 7 percent premium over Tuesday’s closing price on the New York Stock Exchange and 38 percent higher than the closing price on June 30, 2010, the day before Leonard Green disclosed its 9.5 percent ownership stake in BJ’s.

“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 said in a statement. “We are pleased to partner with Laura and the management team and look forward to the next phase of the company’s growth.’’

Retail analysts said taking the company private would allow BJ’s to invest in expansion beyond the Northeast and Southeast — its core markets — without having to worry about quarterly profits. BJ’s, with 190 warehouse clubs in 15 states, is the smallest of such chains in the nation. It competes with Costco Wholesale Corp. and Sam’s Club, operated by Wal-Mart Stores Inc. Each of those businesses operates in at least 40 states, according to David Strasser, an analyst with Janney Capital Markets.