Investment firm suggests BJ's go private

July 1, 2010

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PORTLAND, Ore.—A private equity firm has bought a large stake in BJ's Wholesale Club Inc. and says it plans to talk with the warehouse club's executives about the potential for taking the company private.

Green Equity Investors bought 5.1 million shares of BJ's stock and said the shares are undervalued, according to a regulatory document filed Thursday. That represents about 9.5 percent of the company's shares.

Green Equity plans to discuss options for improving shareholder value -- including taking the company private, new financing or other transactions.

BJ's declined to comment.

The private equity firm has significant investments in food retailers, including Whole Foods Market Inc. Green Equity is an affiliate of retail investors Leonard Green & Partners, which led the buyouts of a number of retailers including Petco Animal Supplies Inc. and Sports Authority.

Janney Capital Markets analyst David Strasser said a leveraged buyout would make sense for BJ's, particularly given Green Equity's solid history of investments in retailers.

BJ's, based in Natick, Mass., is the smallest of the three major wholesale club operators.

Strasser said BJ's has ample room for expansion as its business now is limited to the northeastern U.S. Traffic is up in the company's stores, the company has a solid balance sheet and it is making major operational improvements to prepare for growth, he said.

Shares of BJ's rose $6.09, or 16.5 percent, to $43.10 in afternoon trading.

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