bed bath beyond is expected to be wound up after the failed retailer files for bankruptcy, but the company’s crown jewel – Buy Buy Baby – could see another day.
The baby gear retailer is attracting interest from at least two bidders, CNBC has learned, as its parent company Bed Bath & Beyond works to auction off its assets and keep some form of its business afloat.
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Interested parties include an unknown bidder who would acquire the banner on a going concern basis and keep about 75% of the deals open, according to correspondence obtained by CNBC. The other interested bidder is Babylist, a direct-to-consumer baby registration site that wants to buy its brand and domain, the company’s CEO, Natalie Gordon, confirmed to CNBC.
So far, there doesn’t seem to be any interest in buying the Bed Bath banner and keeping its deals open, but some bidders are interested in buying its digital assets, a person familiar with the matter told CNBC.
It’s not clear how much the unknown bidder is offering to purchase Buy Buy Baby, but he was seeking an additional $50 million in capital to back his bid, according to correspondence. That figure gives a first indication of how much bidders are willing to pay to acquire parts of Bed Bath’s failed deal.
The valuation of the company and its intellectual property is unclear. In its most recent quarterly securities statement, Bed Bath noted that the intangible value of trade names and brands was just $13.4 million.
At the end of November, Bed Bath & Beyond had approximately $4.4 billion in assets and $5.2 billion in debt, according to court filings.
Gordon declined to share the number offered by Babylist for Buy Buy’s brand and domain.
Who are the bidders?
Ankura Capital Advisors, an investment banking firm, is advising the unnamed bidder and said in a May 16 email to its mailing list that the party is seeking a financial partner “to help facilitate the purchase of Buybuy Baby from the BBBY bankruptcy to bring out”.
According to correspondence viewed by CNBC, the client, along with its current financial sponsor, were seeking $50 million in additional capital to support a stalking horse bid for the asset. A stalking horse bid is an offer on the assets of an insolvent company that, if accepted, sets a price floor for future bids.
The mysterious bidder, who was not named in the documents seen by CNBC, is an “independent operator with several successful, complementary retail chains in its portfolio,” the statement said.
“They are open to various investment structures, from equity to preferred stock to other forms of junior capital,” the statement said. “They have already given over 400 hours of intense due diligence and have the team and experience to run the stores as a running business.”
In the email, Ankura notes that Buy Buy Baby had approximately $90 million in inventory at the time it filed for bankruptcy and was liquidating approximately $7.5 million weekly at the time the message was sent.
Babylist showroom floor
Courtesy: Babylist
Babylist describes itself as a contact point for everything that has to do with babies. The company had sales of $290 million in 2022, says it is profitable, and sees over a million new parent signups each year. The company said it was considering making an offer to buy the entire chain, including its stores, but ultimately decided it didn’t fit into its overall strategic plan.
Babylist says it was originally intended as a go-to place for modern parents who are tired of the same pink and blue landscapes over and over again, but is now working to expand its audience to include all members of the proverbial village, including grandparents.
That’s where Buy Buy Baby – and its long-established name – comes in.
If Babylist’s offer to purchase the banner’s brand and domain were accepted, people searching for “buy buy baby” and trying to access the site would be redirected to Babylist, Gordon explained.
“We have a lot of trust with new and expectant parents, but Buy Buy Baby is much better known among the older generation,” she said. “As we expand to include the whole family as an audience, we really think it can give us a boost in that way.”
Gordon said the company has refrained from bidding on Buy Buy Baby’s registration stocks because they could quickly become obsolete.
The company also seems to be taking over shares from Buy Buy Baby. Since Bed Bath’s bankruptcy announcement, Babylist has reported nearly 200,000 new subscribers, more than the company would normally see in that period.
Following the bankruptcy of Babies ‘R’ Us and the possible liquidation of Buy Buy Baby, there are few major retailers left to cater to families that only cater to the infant category. Register options include: Goal, Amazon and Babylist, among others.
Babylist doesn’t operate traditional brick-and-mortar locations, but plans to open its first showroom in Beverly Hills, California this summer.
The crown jewel of Bed Bath & Beyond
This isn’t the first time Buy Buy Baby has seen sales interest. The banner reportedly caught the interest of potential buyers in 2022. It also caught the attention of activist investor Ryan Cohen, co-founder of Chewy and chairman of GameStop, who last March called the baby gear banner one of the company’s most valuable pieces, arguing it could be worth billions of dollars.
Cohen was pushing for a spin-off or sale at the time.
Buy Buy Baby has remained a bright spot in Bed Bath & Beyond’s otherwise dismal earnings reports for the past several years.
A Buy Buy Baby store in the Brooklyn borough of New York, the United States, on Monday February 6, 2023.
Stephanie Keith | Bloomberg | Getty Images
During Bed Bath’s 2021 holiday quarter, same-store sales at Bed Bath & Beyond stores declined 15% — but Buy Buy Baby same-store sales rose in the low single digits.
And more recently, Bed Bath’s third fiscal 2022 quarter ended Nov. 26 saw sales declines across the company, but Buy Buy Baby’s sales declines outpaced Bed Bath’s. During the quarter, comparable sales for the Bed Bath banner fell 34%, while Buy Buy Baby declined in the low range of 20%, the company announced at the time.
When Bed Bath & Beyond stores were shutting down across the country to stem the financial crisis, the company opened more Buy Buy Baby stores hoping the stores would increase sales.
At the end of April, 120 of the stores were still open, along with 360 of Bed Bath’s namesake stores, the company previously said.
Auction Delays
Bed Bath & Beyond’s bankruptcy auction has been postponed twice, which may indicate the company is still trying to raise interest on its assets.
In the months leading up to Bed Bath’s bankruptcy, CNBC reported that the company was courting potential buyers and lenders who would be willing to take over the company and keep its doors open. Potential buyers at the time included private equity firm Sycamore Partners, which was particularly interested in Buy Buy Baby, and Authentic Brands, which has made many insolvent sales for retailers like Forever 21.
In the end, the process proved unsuccessful and resulted in “limited interest in a viable proposal to acquire the debtors’ assets,” according to court filings filed in April in the company’s bankruptcy proceedings.
Still, the company said in those filings that it was confident of divesting its names and branches and said it planned to market the company to avoid a full liquidation.
“While commencing a full winding down of the chain is necessary for economic reasons, Bed Bath & Beyond has marketed its businesses, including the Buybuy Baby business, as going concern and will continue to do so,” the company’s chief financial officer and chief restructuring officer wrote Officer Holly Etlin in a statement to the New Jersey Bankruptcy Court at the time.
In the filing, the company confirmed CNBC’s earlier reporting and said more than 100 potential investors had been engaged by Bed Bath’s advisors. Prospective bidders were asked if they were interested in acquiring the business as a going concern or providing Chapter 11 financing.
The company had hoped that a buyer would be willing to acquire either Bed Bath & Beyond or Buy Buy Baby as separate companies, buying the brands’ intellectual property and perhaps acquiring some of their more powerful businesses.
“Bed Bath & Beyond has completed multiple long-term transactions over the past six months, so no one should believe that Bed Bath & Beyond will not be able to do so again. On the contrary, Bed Bath & Beyond and its professionals will do anything. Efforts to save all or part of the operation for the benefit of all involved,” Etlin added in the filing.
Further delays in the auction process could be a sign that Bed Bath is willing to accept the unknown bidder’s bid provided the bidder can find more capital.
Ankura declined to comment on the matter. Bed Bath & Beyond did not respond to a request for comment.
Bed Bath previously told CNBC that the auction was delayed to “allow more time to ensure the transaction with the greatest value maximization is accomplished.”
Bids for stalking horses are now due 5pm on 8th June with final bids now due on 14th June. An auction, if necessary, is scheduled for June 16th.
– CNBC’s Lillian Rizzo contributed to this report.
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