Bed Bath & Beyond Inc. (>> Bed Bath & Beyond Inc.) agreed to acquire Cost Plus Inc. (CPWM) for about $494 million through a cash tender offer as the home furnishings retailer adds a discount chain to its offerings.
Cost Plus runs stores that sell a mix of home furnishings, accessories and gourmet food and wine at discount prices. President and Chief Executive Barry Feld said in March that the company's same-store sales improved markedly in the second half of the latest fiscal year, allowing the company to report a profit.
The company staved off extinction during the depths of the financial crisis as its shares were trading for less than $1 during parts of 2009.
The deal, worth $22 a share, marks a 22% premium over Tuesday's close of $17.99. The stock has surged 85% this year through the close and last traded above the offer price in 2005. Shares were halted premarket. Cost Plus had 22.5 million shares outstanding as of April 6.
Bed Bath & Beyond, meanwhile, has posted stronger profits since the recession, helped by cross merchandising, flexibility for local management and advertising cuts. The retailer has also increased sales over the past two years while keeping overhead costs relatively steady.
The offer has the backing of Red Mountain Capital Partners LLC and Stephens Investment Holdings LLC, the two largest shareholders of Cost Plus, which together own about a 26% interest.
The deal, which is expected to close during Bed Bath & Beyond's fiscal second quarter, is also expected to slightly add to its per-share earnings for fiscal 2012, after transaction and integration costs. The company still expects a high-single-digit to a low-double-digit percentage increase in per-share earnings this year.
Both boards have approved the deal, and a special committee of the Cost Plus board has recommended the offer.
The deal isn't subject to financing and will be funded with available cash.
In March, Cost Plus reported its fiscal fourth-quarter profit grew a stronger-than-expected 28% as both customer volume and spending climbed. And Bed Bath & Beyond last month said its fiscal fourth-quarter profit climbed 24% as the housewares retailer's revenue growth and same-store sales topped its expectations.
Bed Bath & Beyond shares were off 2% to $66.84 premarket.
-By Lauren Pollock, Dow Jones Newswires; 212-416-2356; email@example.com