BJ’s hires adviser to conduct auction of company

NEW YORK (BestGrowthStock) – BJ’s Wholesale Club Inc (BJ.N: ) has hired Morgan Stanley (MS.N: ) (Read more about the money market today. ) to run an auction for the company and explore other strategic options, a source familiar with the situation said on Wednesday.

The move comes after the warehouse club operator received an offer from private equity firm Leonard Green & Partners LP in recent months, Bloomberg reported, citing three people familiar with the situation.

BJ’s shares jumped 12.6 percent to close at $47.34 following the report. The company, which has a market capitalization of about $2.3 billion, declined to comment.

In July, a fund run by Leonard Green said it had taken a 9.5 percent stake in BJ’s and that it might propose taking the company private.

Brian Sozzi, an analyst with Wall Street Strategies, estimated BJ’s could fetch roughly $3 billion to $3.3 billion in an auction, or roughly 6- to 7-times EBITDA (earnings before interest, taxes, depreciation and amortization).

“I would think management would make the case that its investments this year and next will yield efficiencies in the future,” Sozzi said.

Green could not immediately be reached for a comment. Morgan Stanley declined to comment.

BJ’s has struggled to expand due to the earnings hits that come with opening in new markets, Janney Capital Markets analyst David Strasser said in a research note.

“We envision a scenario where BJ management, as a private company, takes the earnings hit in the near term by entering new markets, and then grows square footage by predominantly filling in these markets, providing a sustainable square footage growth story and a solid exit strategy to go public again,” Strasser said.

Leonard Green has about $9 billion in equity capital under management. Founded in 1989, it has invested in 51 companies with aggregate value of $43.4 billion.

(Reporting by Sakthi Prasad in Bangalore, Brad Dorfman and Doris Frankel in Chicago and Jessica Hall in New York; Editing by Maureen Bavdek, Dave Zimmerman, Steve Orlofsky, Phil Berlowitz)

BJ’s hires adviser to conduct auction of company