In the US, private equity firm Bain Capital Partners has agreed to buy family-run discount retailer Burlington Coat Factory Warehouse Corp for $2.06bn (e1.72bn). It is the latest example of private equity investors targeting large retailers or restaurant groups for their prized real estate holdings.
In its 34-year history, Burlington has grown from a single location into a chain with 367 stores under the Burlington Coat Factory, MJM Designer Shoe and Super Baby Depot brands.
Bain is to pay $45.50 for each Burlington share, which would value the holding of founder Monroe Milstein and his two sons at around $1.28bn. The offer price was 2.1% higher than Burlington’s closing share price on the day the deal was announced.
Bain will “partner with the experienced management team” at Burlington and seek to expand the retailer’s store holdings, according to Bain managing director Jordan Hitch.
New Jersey-based Burlington is thought to have agreed to the buyout after seeing volatile results, stagnant share prices and little store expansion in recent years. Last June the company announced that it had commissioned Goldman Sachs for assistance in seeking a buyer or other strategic alternatives. The disclosure prompted a 16% jump in Burlington’s share price. The share price subsequently reached record levels owing to sale speculation.
“Everybody liked Burlington, and the Milsteins know everybody,” said New Jersey-based retail industry analyst Kurt Barnard. “But they weren’t going anywhere and weren’t adding new stores, so they decided to cash out.”
The deal is the second major acquisition announced by Bain in as many months. In December, the investment firm led a group of investors that agreed to buy Dunkin’ Donuts and the rest of the restaurant business of Pernod Ricard for $2.43bn.
In another such buyout last July, Bain teamed up with takeover specialist Kohlberg Kravis Roberts & Co and New Jersey-based retail REIT Vornado Realty Trust to acquire US toy retailer Toys R Us for $6.6bn.
Earlier this month, Vornado announced that Toys R Us planned to close 75 of its 674 stores during the first quarter and convert another 12 locations into its Babies R Us brand.
Vornado said that the store closures were contemplated at the time of the acquisition and finalised after performance was analysed during the 2005 holiday season. Vornado will handle the leasing and disposition issues.