Bloomberg News

BJ’s Wholesale Sued by Investor Over $2.8 Billion Takeover

June 30, 2011

(Updates with details from complaint starting in second paragraph.)

June 30 (Bloomberg) --BJ’s Wholesale Club Inc., the third- largest U.S. warehouse-club chain, was sued by an investor claiming its proposed $2.8 billion takeover price is “grossly inadequate”.

Leonard Green & Partners LP is acquiring the company at a “substantial” discount to its true value and BJ’s directors locked up the deal by agreeing to “impermissible” deal- protection devices, lawyers for shareholder Maxine Phillips said in the complaint filed yesterday in Delaware Chancery Court. Phillips is seeking to represent all BJ’s shareholders in her bid to bar the deal.

Directors “have effectively placed a cap on BJ’s corporate value at a time when the company’s stock price was recovering from the recent economic decline,” lawyers for Phillips said in the complaint.

Under the agreement, Leonard Green and CVC Capital Partners will pay BJ’s investors $51.25 in cash for each share they hold. The takeover gives the firms BJ’s 190 wholesale clubs in 15 U.S. states for a valuation of about 7.1 times earnings before interest, tax, depreciation and amortization.

Cathy Maloney, a spokeswoman for BJ’s, didn’t immediately return a phone call seeking comment on the complaint.

Leonard Green, which manages about $9 billion, has taken part in at least five retail deals in the past year including offers for J. Crew Group Inc. and fabric seller Jo-Ann Stores Inc. BJ’s is the No. 3 warehouse-club chain after Costco Wholesale Corp. and Wal-Mart Stores Inc.’s Sam’s Club.

The case is Maxine Phillips v. BJ’s Wholesale Club, CA6623, Delaware Chancery Court (Wilmington).

--With assistance from Chris Burritt in New York. Editors: Glenn Holdcraft, Stephen Farr

To contact the reporter on this story: Sophia Pearson in Wilmington at spearson3@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net


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