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BJ’s Wholesale Club still isn’t safe from the clutches of private equity.
Leonard Green & Partners — a Los Angeles buyout firm that disclosed a 9.5 percent stake in the warehouse chain in July — remains keen to acquire the retailer and may launch a hostile bid if an auction isn’t initiated in the coming weeks, sources told The Post.
“If it gets to mid-January and a sale has not started, there may be difficult conversations,” according to one source close to the situation, adding that BJ’s board and management have promised to initiate a sales auction after the holidays. The source added that Leonard Green has “made it clear they have the potential to go hostile” with a BJ’s bid.
That’s despite the fact that Leonard Green gave Wall Street a high-stakes holiday surprise last week, scooping up arts-and-crafts retailer Jo-Ann Stores for $1.6 billion. News of the Jo-Ann deal came on the heels of last month’s announcement that Leonard Green had partnered with Texas-based buyout giant TPG to acquire preppy clothier J. Crew for $3 billion.
Leonard Green’s retail shopping spree has stoked speculation that the buyout firm has given up on a BJ’s bid, or that the firm now may have its hands full with its recent acquisitions.
In fact, sources said, Leonard Green is still looking to put to work $5.3 billion in cash it raised for a buyout fund in 2007. As of April, Leonard Green had invested only a third of the fund, according to data from a presentation earlier this year by JPMorgan.
BJ’s declined to comment, and Leonard Green didn’t respond to a request for comment.
As reported by The Post, BJ’s last month hired Morgan Stanley to explore strategic alternatives, including a possible sale of the company. But the move came only after months of prodding from Leonard Green, and Morgan Stanley is known for its expertise in “defense” for companies looking to fend off hostile acquirers, one banking source noted.
The source added that BJ’s management owns relatively little of the retailer’s stock and could be ousted if the company is taken private.
Sources said BJ’s management has previously weighed the idea of selling and then leasing back its real-estate assets, which are worth as much as $1 billion, according to a study this year by the investment bank Jefferies.
But such a transaction could also be used to fund a buyout, said Jefferies analyst Daniel Binder.
“I think a takeout in the $50 to $55 range still makes a lot of sense,” Binder said, noting that going private would allow BJ’s to make more aggressive investments to turn around its stores.
Still, BJ’s sales have shown improvement in recent months, increasing investor confidence and limiting downside to the stock if a buyout doesn’t materialize, the analyst added.
BJ’s shares, which have risen 36 percent this year, closed yesterday at $44.47, down 53 cents. jkosman@nypost.com