Shares of Big Lots (BIG) - Get Big Lots, Inc. Report got a big bump up Thursday after the discount retailer inked a $725 million sale leaseback deal for a quartet of company-owned distribution centers.
Big Lots' stock price shot up more than 29% to $20.38 a share on news of the deal with Oak Street Real Estate Capital.
After expenses and taxes, Big Lots expects to pocket $550 million for the deal, which involves distribution centers in Columbus, Ohio, where the retailer is headquartered, as well as in Durant, Okla., Montgomery, Ala., and Tremont, Penn.
Big Lots will use the cash to pay off its revolving credit line and boost liquidity while looking ahead to potential growth initiatives and share buybacks "when market conditions normalize."
The sale leaseback agreement with Chicago-based Oak Street is expected to close in Big Lots' fiscal second quarter, the retailer said.
"The transactions will provide the company with significant additional liquidity to navigate the current uncertain environment," said Bruce Thorn, president and CEO of Big Lots, in a press statement.
However, a pair of investor groups seeking to wrest control of Big Lots board, while praising the deal, panned the retail giant's management.
"Had it not been for a threat of a proxy contest, the Investor Group believes the Board would have rejected entering into the sale leaseback transaction altogether," said Marcellum Advisors and Ancora Advisors, in a joint statement.
The investor groups, which own 11.5% of the outstanding shares of Big Lots, contend Big Lots, which has more than 1,400 stores, could reap an additional $427 million by cashing in on its other real estate assets.