NATICK, Mass. — Stock in BJ's Wholesale Club soared last week amid speculation that the warehouse club operator would put itself up for sale.
The No. 3 membership-club operator had hired Morgan Stanley to conduct a sale, according to a report by Bloomberg News, which cited three unnamed sources. BJ's has been the subject of investor speculation for some time, but interest was renewed in late June after Los Angeles-based private investor Leonard Green & Partners disclosed a 9.5% ownership stake in BJ's and expressed interest in taking the company private.
A BJ's spokeswoman declined comment to SN. Leonard Green was not immediately available for comment.
The Bloomberg report said an offer from Green sparked the hiring of an advisor. Sources contacted by SN stressed they didn't know whether a sale would necessarily take place, however.
“BJ's would have to respond to any serious offer that was made — but what we don't know is what had been discussed between Leonard Green and the company,” Chuck Cerankosky, an analyst following BJ's for North Coast Research, Cleveland, told SN. “At some stage the discussions reach a point at which the company and the board feels it needs to hire a financial advisor. But that doesn't always mean there will be a sale, as we saw recently when Casey's General Stores hired a financial advisor and rebuffed a hostile takeover from Couche-Tard and then discussed a friendly offer with 7-Eleven, which also ended without a sale.”
Cerankosky noted that BJ's is attractive to investors because it generates strong cash flow, has performed well in recent years and has a clean balance sheet.
“It's attracted interest from investors who realize the stock could go higher on fundamentals and higher still on a strategic or financial buyer for the organization,” Cerankosky said.
Neil Stern, senior partner at McMillan Doolittle, Chicago, said private investors interested in BJ's may be seeking to monetize its real estate. “Typically, the private equity guys want to clean up a company, but they are also looking for levers,” Stern said. “I suspect in BJ's they see something they can work on.”
BJ's stock was up more than 12% following the publication of the Bloomberg article.