Adding to its “beyond” department, home goods retailer Bed Bath & Beyond (BBB) announced today that it is acquiring its smaller competitor Cost Plus for about $495 million in cash. The $22-per-share offer tops Cost Plus’ closing price of $17.99 yesterday by 22%.
The pending purchase would add about 259 stores to BBB’s current portfolio of some 1,175 stores. With $9.5 billion in sales last year, BBB is the nation’s #1 operator of home goods superstores. In addition to about 1,000 namesake stores, BBB operates three smaller specialty chains: Christmas Tree Shops, fast-growing buybuy BABY, and Harmon health and beauty stores.
With strong sales and profit growth, and no long-term debt, $9.5-billion-in-sales BBB is poised to make strategic acquisitions. Oakland-based Cost Plus, with about a tenth of BBB’s sales, operates shops under the World Market, Cost Plus World Market, Cost Plus Imports, and World Market stores in 30 states. The “wicker, wine and cheese” chain sells both home furnishings imported from more than 50 countries and gourmet food and beverages (about 40% of sales), a brand new category for BBB. Cost Plus stores stock wine, beer, coffee and tea, snacks, candy, spices and seasonings, sourced worldwide.
The deal comes after Cost Plus and BBB partnered to test a specialty food department at some BBB stores. The 18-month test showed that the food departments “could help generate in-store traffic and sharpen the edge against online retailers,’” says the Cost Plus CEO in a letter to employees on the company’s website. By adding food and drink, BBB hopes to fend off increasing competition from Internet retailers and discounters.
For its part, Cost Plus, which harbored ambitious expansion plans, has seen its store count shrink from more than 300 locations two years ago to 259 at present. The chain will benefit from its new owner’s deep pockets and greater retail reach.
The deal, which won unanimous approval from both boards, is expected to close during BBB’s fiscal second quarter, which ends in August. Cheers!