UNION, N.J., AND OAKLAND, CALIF. — Bed Bath & Beyond Inc. (NASDAQ: BBBY) announced Wednesday that it has entered into a definitive agreement to acquire Oakland-based Cost Plus Inc. (NASDAQ: CPWM) in an all-cash transaction for $22 per share, or $495 million.
Cost Plus is known for its selection of home décor, furniture and unique food offerings from all over the world. The retailer currently operates 259 stores in 30 states under four names, which include World Market, Cost Plus World Market, Cost Plus Imports and World Market Stores.
“The two companies have collaborated during the last 2 years with Bed Bath & Beyond selling Cost Plus World Market products in a few stores,” according to Laura Champine, analyst with Canaccord Genuity. The transaction will expand Bed Bath & Beyond's food offerings into the gourmet food and beverage categories. Additionally, Bed Bath & Beyond will provide greater scale and capital structure to support the 259 stores Cost Plus owns, she adds.
“Financially, Cost Plus was performing okay, but not great,” says Jeff Green, a retail consultant and owner of Phoenix-based Jeff Green Partners. “I was a little concerned that they might be closing some stores. They did leave certain markets several years ago. I wonder if they may now go back into those markets that they left.”
In January 2009, Cost Plus closed 26 stores and exited nine markets, including Cincinnati, Ohio; Fort Lauderdale, Florida; Fort Wayne, Indiana; Memphis, Tennessee; Omaha, Nebraska; Rockford, Illinois; and Minneapolis-St. Paul and Rochester, Minnesota. After posting a loss of $102.6 million in 2008, the company has shown continued improvement and had net gain of $16.4 million for fiscal 2011.
“This is a good acquisition in terms of the real estate community because it gives Cost Plus some horsepower to grow,” Green says.
At this time, all of the stores will remain Cost Plus stores, says Kenneth Frankel, director of investor relations at Bed Bath & Beyond.
The acquisition is expected to close during Bed Bath & Beyond’s fiscal second quarter, which ends in August. If the minimum tender or other conditions are not met, the companies have agreed to complete the transaction via a one-step merger, subject to shareholder approval.
“We are thrilled about the prospects of welcoming the Cost Plus team and their customers and vendors to the Bed Bath & Beyond family,” said Steven Temares, CEO and member of the board of directors of Union-based Bed Bath & Beyond. “Through the combination of the highly talented Cost Plus organization with our own dedicated associates, we expect to be able to do even more for, and with, our collective customers.”
Goldman, Sachs & Co. is the financial advisor for Bed Bath & Beyond and Proskauer Rose is the legal advisor. Peter J. Soloman Co. is the financial advisor for Cost Plus and Skadden, Arps, Slate, Meagher & Flom is the legal advisor.
Bed Bath & Beyond’s share price closed at $68.02 on Wednesday, May 9, up from $55.47 a year ago. The share price of Cost Plus closed at $21.93, up from $10.63 a year earlier.
— Savannah Duncan