On May 15, Leonard Green & Partners disclosed in a 13F filed with the Securities and Exchange Commission that it had accumulated nearly 1 million shares in the Union, N.J.-based retailer.
Instead, the firm sticks to full-on leveraged buyouts. By taking a small stake in Bed Bath & Beyond, Leonard Green is suggesting to the home furnishings retailer's board that it is serious about acquiring the business.
A buyout firm will sometimes approach a publicly traded company about a potential deal, the industry source said.
The company, uncertain about the seriousness of the approach, usually gives the suitor the cold shoulder because it doesn't want to distract its management by engaging in talks if the flirting turns out to be fleeting. Amassing even a small stake, as Leonard Green has done here, can sometimes get the board to the bargaining table.
The move could also be a signal for activists to get involved and nudge the potential target into talks. And investors bidding the stock up on the news of Leonard Green's stake does put pressure on the board and management to prove that they are carrying out their fiduciary duties.
As previously reported, activist firms have become more willing in recent years to assist private-equity firms in LBOs by essentially putting a company on the auction block or reviving continuing but stalled deal talks.
Neither Bed Bath & Beyond nor Leonard Green responded to requests for comment.