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BJís Wholesale Club Up For Sale; Amazon May Be Interested

Old 04-15-17, 09:33 AM
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BJís Wholesale Club Up For Sale; Amazon May Be Interested

From nypost.com:

BJís Wholesale Club is putting itself up for sale, and Amazon has expressed modest internal interest in the chain, retail resources tell The Post.

BJís, a Northeast-regional warehouse retailer thatís owned by private equity firms, has recently scrapped ambitions for an initial public offering because of Wall Streetís growing worries over the retail sector, sources said.

Instead, CVC Capital Partners and Leonard Green & Partners, the buyout firms that took BJís private for $2.8 billion six years ago, are pressing ahead for an outright sale that could fetch more than $4 billion, according to people close to the situation.

BJís has been interviewing bankers so it can begin a sale process, and the company plans to distribute sales books in a few weeks, sources said.

Retail-savvy buyout firms, like KKR, Bain Capital, TPG and Blackstone, are expected to take a look, insiders said. In 2011, Walmart made an unsuccessful approach to buy BJís, but is unlikely to make another attempt, one source speculated.

Meanwhile, Amazon ó which has been exploring an expansion into brick-and-mortar stores after conquering online retailing ó has also recently discussed evaluating BJís as an acquisition target, a source close to the situation said. It is not known if the e-commerce giant is still interested or, if it is, will bid on the chain if it goes on the block.

CVC and Leonard Green expect to attract between $4 billion and $4.5 billion in a sale ó roughly nine times BJís $450 million in Ebitda, or earnings before interest, taxes, debt and amortization.

If successful, the private equity firms will have invested about $600 million in cash since buying BJís in 2011 (the rest of the buyout was funded with debt), while collecting between $2.8 billion and $3.3 billion in dividends and sale proceeds ó roughly a five-fold return on their money.

BJís, which operates 213 warehouse clubs and 130 gas stations across 15 states, generates about $250 million a year from membership fees.

BJís and Amazon also share overlap when it comes to merchandise, as both do a big business selling groceries, electronics, home goods and auto parts. BJís also has a robust business in appliances and furniture ó niches where Amazon is looking to expand, according to one source.

Amazon, meanwhile, has been struggling to find enough warehouse space for its Amazon Fresh delivery service, and adding BJís could be a help, at least in the Northeast, the source said.

However, the private equity firmsí cost-cutting and cash skimming has hurt BJís competitively, Kantar Research analyst Tim Campbell said.

The chain has not done as well as it could online, hasnít grown much beyond its Northeast base, and has had trouble retaining newer members, he said.

ďI think the buyout has been beneficial to the owners but not for the actual BJís business,Ē Campbell told The Post.

A BJís spokesman said, ďAs a matter of policy, BJís Wholesale Club does not comment on rumors and speculation. As a company, weíre focused on providing outstanding value and service to our members.Ē

Amazon did not return calls.


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