by Richard Collings | Published May 9, 2012 at 12:00 PM
Home goods retailer Bed Bath & Beyond Inc. on Wednesday, May 9, agreed to acquire discount home furnishing chain Cost Plus Inc. for $495 million in cash.
Under the terms of the transaction, Bed Bath will pay $22 a share, a 22% premium to the target's Tuesday closing share price. The cash-rich buyer--with over $1 billion in cash on its balance sheet as of Feb. 25--is acquiring a discount chain that has only recently to profitability after it was hammered during the recession. Bed Bath & Beyond has benefited from the 2008 bankruptcy filings of a major rival, Linen 'n Things.
Cost Plus has received commitments to the deal from its two largest shareholders, Red Mountain Capital Partners LLC and Stephens Investment Holdings LLC, which hold a 26% cumulative stake. The boards of both companies have approved the transaction.
Bed Bath, based in Union, N.J, projects that the deal will close in the fiscal second quarter and will be accretive to its net earnings in fiscal 2012. The buyer will finance the deal with cash, and noted that the deal is not subject to debt financing.
Oakland, Calif.-based Cost Plus is the parent of Cost Plus World Markets, a retailer of home furnishings and decor, as well as gourmet food and beverages. It had about $5.9 million in cash on its balance sheet and about $116 million in debt. For its fiscal fourth quarter ended Jan. 28, Cost Plus reported profit of $36.5 million, up 28% from the prior year, on $364 million in revenue. For the year ending Jan. 28, Cost Plus earned $16.5 million on revenue of nearly $964 million.
Barry J. Feld, Cost Plus' chief executive, in a statement said, "This transaction will offer immediate and compelling value to our shareholders... Our successful merchandising and product collaborations over the last two years have demonstrated that our organizations work well together and that we can make key contributions to the continued success of the combined company."
Steven H. Temares, Bed Bath & Beyond's chief executive, added, "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."
Bed Bath & Beyond's financial adviser is Goldman, Sachs & Co. and Proskauer Rose LLP is its legal adviser. Cost Plus is taking financial advice from Peter J. Solomon Co. and legal counsel from Skadden, Arps, Slate, Meagher & Flom LLP's Rick Madden, Brian McCarthy, Joseph Yaffe and Eric Waxman.