Bed Bath & Beyond (BBBY), a Union, New Jersey-based home goods store, is on track to choose a stalking horse bidder as soon as this week as a means to sell its Buybuy Baby business in accordance with its bankruptcy proceedings, said two sources familiar with the matter.
Books for the asset were sent out roughly three weeks ago, one source said. It is being marketed on roughly USD 50m in EBITDA, another source said. Lazard is running the process, said the sources and a third source.
According to a filing, Kirkland & Ellis and Cole Schotz PC are serving as legal counsel. The filing names Lazard as well as AlixPartners as the company’s financial advisors.
Court filings show the deadline to accept a stalking horse bidder is 1 June, with BBBY’s bankruptcy auction several days later. BBBY filed for bankruptcy on 23 April and sought permission to divest Buybuy Baby as a means of optimizing its auction effort.
Sponsor interest is strong for Buybuy Baby’s retail stores because they are profitable, said several sources. One source described the asset as the “jewel” of the BBBY portfolio “by far.”
With 120 stores today, one source said it has seen “strong” growth since BBBY acquired the asset in 2007 for USD 68m. That source also noted its competitor, Babies R Us (Toys R Us), filed for bankruptcy in 2017.
While it is an attractive “opportunity” for sponsors, he said, this carve-out is also a “messy” and difficult process because of BBBY’s bankruptcy proceedings—which also make Buybuy Baby difficult to value. “It’s not a simple divest,” he said.
In January, The New York Times reported the company was in talks with private equity firm Sycamore Partners, among other suitors, regarding the sale of Buybuy Baby and other assets as it prepared for a possible bankruptcy filing. In August 2022, reports surfaced that Cerberus Capital was looking at the asset.
Ultimately, however, after a strategic review, BBBY decided to forgo a sale of its Buybuy Baby business in a turn-around effort to produce greater value for shareholders. It also secured USD 500m in new financing.
For this report, the sources named Sycamore as a logical suitor that plays in retail, with apparel chains like Hot Topic, The Limited and Ann Taylor Loft in its portfolio; as well as Leonard Green, which owns The Container Store and JOANN.
One source also noted OpenGate Capital, Gores Group, Yucaipa, and Platinum Equity as consumer-focused sponsors that could show interest.
Regarding sector headwinds that could temper buyer interest, the sources noted the poor performance among specialized retail concepts—especially those that don’t sell their own brand, one source said.
Still, any sizeable and profitable players in the mother-and-baby segment will always be attractive because of the resiliency of sales for baby products, even in a down market, several sources stressed.
BBBY did not respond to a request for comment. Lazard declined to comment.
