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Burlington Coat Factory the Next Retail-for-Real-Estate Play

Bain Capital To Buy 367-Store Chain in 42 States for $2.06 Billion in Cash
January 26, 2006
Burlington Coat Factory Warehouse Corp. (NYSE:BCF) accepted a buy-out offer from Boston-based private equity firm Bain Capital Partners LLC for $2.06 billion, or $45.50 per share in cash.

Founded by the Milstein family, which swung its 62% ownership stake in favor of the Bain offer, the New Jersey-based Burlington Coat Factory started its 36-year run as an outlet chain offering designer coats at discount prices. Today, the retail chain has 367 stores in 42 states and sells a wide selection of apparel including shoes, baby furniture and home accessories.

Lately faced with stagnant share prices from a seemingly indifferent Wall Street and increasing competition from discounters, many big box retailers are turning to the ground underneath their stores to attract buyers and keep investors happy.

Meanwhile, private equity buyers like Bain can tap the chain's highly valued real estate, either by selling off stores or using the real estate as collateral for borrowing funds needed to turnaround underperforming companies and hopefully sell them at a premium later.

Bain has made private equity investments and add-on acquisitions in more than 230 companies, including Toys 'R Us, Burger King, Staples, Shopper's Drug Mart, Brookstone, Domino's Pizza, Sealy Corp., Sports Authority, Duane Reade and Dollarama.

"We are thrilled that a transaction with Bain Capital delivers significant value to our stockholders," said Monroe Milstein, Burlington Coat Factory's chairman, president and CEO.

Earlier this month, Burlington reported its net income from continuing operations was $45.4 million, or $1.01 per share, for the three months ended November 26 compared with income from continuing operations of $41.5 million, or $0.93 per share, for the corresponding period ended November 27, 2004.

In the same press release, Burlington also stated that sales for three months ended November 26 were $945.4 million compared with sales of $872 million during the corresponding period ended November 27, 2004. Comparative store sales for the quarter increased 5.3%. Total sales for the quarter increased 8.4% over the comparative quarter of the previous fiscal year.

Goldman, Sachs & Co. acted as financial advisor to Burlington during the process. Hughes Hubbard & Reed LLP was legal counsel to Burlington. Kirkland & Ellis LLP was legal counsel to Bain Capital.

In other news, Bain Capital is close to acquiring the Sensors & Controls division of Texas Instruments Inc. for $3 billion. TI signed an agreement to sell the Attleboro, MA-based business to Bain earlier this month.

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