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Retail M&A: 28 Possible Deals in 2011

NEW YORK ( TheStreet) -- Retail takeover activity is heating up in 2011.

After nearly a year of speculation, BJ's Wholesale (BJ)is finally being purchased. The discounter said on June 29 that it agreed to a $2.8 billion offer made by Leonard Green and CVS Capital.

As part of the deal, the buyout firms will pay $51.25 a share for the warehouse retailer, a 6.6% premium to BJ's closing price of $48.08 on Tuesday.

This was nearly one year to the date that Leonard Green took a 9.5% stake in BJ's.

Timberland (TBL) also received a bid of more than $2.2 billion from VF Corp. (VFC). The deal is valued at $43 a share, a 43.4% premium over Timberland's closing price on June 10.

VF, which owns Wrangler, Nautica and The North Face, will incorporate Timberland iinto its outdoor and action-sports business.

Other deals so far in 2011 include skate and surf lifestyle brand Volcom (VLCM) being purchased by PPR for $607.5 million. PPR, which owns Gucci and Puma, will pay $24.50 per share for Volcom, a 24% premium over its closing price on April 29.

These deals were jump started following the acquisition of J.Crew's by Leonard Green and TPG Capital for nearly $3 billion, as well as the Gymboree sale and buyout (also by Leonard Green) of Jo-Ann Stores.

"The depressed valuations held by many publicly traded apparel retailers, their very good cash flow characteristics, strong balance sheets and attractive earnings leverage, coupled with the low interest-rate environment and a preponderance of highly liquid, private equity funds seeking investments creates a favorable environment for both buyers and sellers, in our view," Stifel Nicolaus analyst Richard Jaffe wrote in a note earlier in the year.

The companies that are most attractive to private-equity bidders are stable, steady producers, says Michael O'Hara, CEO and managing member of Consensus Advisors.

Nomura Securities International analyst Paul Lejuez says he likes companies that act their age, have international opportunity, flexibility and pricing power. "We believe the four characteristics that are attractive to us should also be attractive to private equity," he wrote in a note following the J.Crew deal.

Strategic buyouts are also finally popping up, after private-equity deals have dominated the headlines in the retail sector.

On March 24, Walgreen (WAG) announced it would purchase drugstore.com (DSCM) for about $429 million.

Under the agreement, drugstore.com shareholders will receive $3.80 in cash per share, a premium of 113% over its closing price on March 23.

The move could open the floodgates for more strategic acquisitions for those retailers that are seeing stability in their business model and the return of the consumer.

Over the last several years retailers have horded cash and reduced debt significantly, putting them in prime position to make a bid. The retail sector is also growth constrained and many retailers have maxed out opportunities at their core concepts.

If you missed the boat on the deals so far in 2011, click on for other potential takeover candidates...

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