Bed bath & beyond is expected to dissolve after the failed retailer declares bankruptcy, but the company’s crown jewel – Buy Buy Baby – may live another day.
The baby gear seller is drawing interest from at least two bidders as its parent company, Bed Bath & Beyond, attempts to auction off its assets and keep some form of its business alive, CNBC has learned.
Among the interested parties is an unknown bidder, who would buy the banner as a going concern and keep about 75% of the stores open, according to correspondence obtained by CNBC. The other interested bidder is Babylist, a direct-to-consumer baby registry website that wants to buy its trademark and domain, that company’s CEO, Natalie Gordon, confirmed to CNBC.
So far, it doesn’t seem like there’s any interest in buying the Bed Bath banner and keeping the stores open, but some bidders are interested in buying the digital asset, a person familiar with the matter told CNBC.
It’s not clear how much the unknown bidder is offering to buy Buy Buy Baby, but according to the correspondence, he was seeking an additional $50 million in capital to support his proposal. That figure provides the first clue as to how much bidders are willing to pay to clear out the pieces of Bed Bath’s fallen company.
The valuation of the company and its intellectual property is unclear. In its most recent quarterly securities filing, Bed Bath noted that the intangible value of trade names and trademarks was only $13.4 million.
At the end of November, Bed Bath & Beyond had about $4.4 billion in assets and $5.2 billion in debt, court documents show.
Gordon declined to share the number Babylist offered for the Buy Buy trademark and domain.
Who are the bidders?
Ankura Capital Advisors, an investment banking firm, advises the unnamed bidder, saying in a May 16 email to its distribution list that the party is seeking a financial partner “to help lead the purchase of Buybuy Baby out of BBBY’s bankruptcy.”
The client was seeking the additional $50 million in capital in addition to its current financial sponsor to support a stalking horse bid for the asset, according to the correspondence, which was accessed by CNBC. A stalking horse bid is a bid for the assets of a bankrupt company that, if accepted, sets a floor price for future bids.
The mysterious bidder, who is not named in the documents seen by CNBC, is an “independent operator with multiple successful, complementary retail chains in their portfolio,” according to the report.
“They are open to different structures for the investment, from equity to preferred equity and other forms of junior capital,” the post reads. “They have already spent over 400 hours of extensive dedication and have the team and experience to keep the stores running.”
In the email, Ankura notes that Buy Buy Baby had about $90 million in inventory at the time of the bankruptcy filing and was liquidating about $7.5 million weekly at the time the notice was sent.
Babylist showroom floor
Courtesy: Baby List
Babylist bills itself as a destination for all things baby. It saw $290 million in revenue by 2022, says it’s profitable and counts more than a million new parent signups each year. The company said it considered bidding for the entire chain, including the stores, but ultimately decided not to fit into the overall strategic plan.
Babylist says it started out as a destination for the modern parent tired of the same old pink and blue landscapes, but now works to expand its audience to all members of the proverbial village, including grandparents.
That’s where Buy Buy Baby – and its long-held name recognition – would come into play.
If Babylist’s offer to acquire the banner’s trademark and domain were accepted, people searching for Buy Buy Baby and trying to access the website would be redirected to Babylist, Gordon explains.
“We have tremendous trust with new and expectant parents, but Buy Buy Baby is much more familiar to sort of that older generation,” she said. “So as we expand to the whole family as an audience, we really think it can jump-start us in that way.”
Gordon said the company chose not to bid for Buy Buy Baby’s registry assets because of the speed at which they can get old.
In addition, the company already appears to be taking shares of Buy Buy Baby. Since Bed Bath’s bankruptcy was announced, Babylist has had nearly 200,000 new signups, which is a higher number of new customers than the company usually sees in that period, it said.
After the bankruptcy of Babies ‘R’ Us and the possible liquidation of Buy Buy Baby, there are few large retailers that can focus exclusively on the baby category. For registers include their options Goal, Amazon and Babylist, among others.
Babylist has no traditional physical locations, but plans to open its first showroom this summer in Beverly Hills, California.
The crown jewel of Bed Bath & Beyond
This isn’t the first time Buy Buy Baby has expressed an interest in selling. 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 pointed to the baby gear banner as one of the most valuable parts of the company, arguing it could be worth several billion dollars.
At the time, Cohen pushed for a spin-off or sale.
Buy Buy Baby has remained a bright spot in Bed Bath & Beyond’s otherwise dismal earnings reports in recent years.
A Buy Buy Baby store in the Brooklyn borough of New York, U.S., on Monday, February 6, 2023.
Stephanie Keet | Bloomberg | Getty Images
In Bed Bath’s 2021 fiscal holiday quarter, same-store sales for Bed Bath & Beyond stores fell 15%, but Buy Buy Baby same-store sales grew low-single digits.
And more recently, during Bed Bath’s fiscal third quarter of 2022, which ended Nov. 26, sales declines were reported company-wide, but Buy Buy Baby’s sales declines outperformed Bed Bath’s. During the quarter, comparable sales at Bed Bath banner fell 34%, while those at Buy Buy Baby fell into the low 20% range, the company said at the time.
When Bed Bath & Beyond locations across the country closed as part of the company’s effort to stem the financial hemorrhage, it opened more Buy Buy Baby locations in hopes that the stores would boost sales.
At the end of April, 120 of the stores were still open, in addition to 360 of Bed Bath’s namesake stores, the company said earlier.
Auction delays
Bed Bath & Beyond’s bankruptcy auction has been postponed twice, suggesting the company is still trying to collect interest on its assets.
In the months before Bed Bath went bankrupt, CNBC reported that the company was courting potential buyers and lenders who would be willing to take over the business and keep the doors open. At the time, potential buyers included private equity firm Sycamore Partners, which was particularly interested in Buy Buy Baby, and Authentic Brands, which has gone through many bankruptcies for retailers like Forever 21.
Ultimately, the lawsuit proved unsuccessful and generated “limited interest in a viable proposal to acquire the debtors’ assets,” according to court documents filed in April in the company’s bankruptcy suit.
Still, the company said it did in those documents confident it was able to offload its names and stores and said it intended to put the company on the market to avoid outright liquidation.
“While the start of a complete run-down of the chain is necessitated by the economic realities, Bed Bath & Beyond has and will continue to market their business as an ongoing business, including the buybuy Baby business,” the statement said. Chief Financial Officer and Chief Restructuring of the company. officer Holly Etlin wrote in a statement to New Jersey bankruptcy court at the time.
In the documents, the company confirmed CNBC’s earlier reporting and said more than 100 potential investors had been hired by Bed Bath’s advisors. Potential bidders were asked if they were interested in buying the company as a going concern or providing Chapter 11 financing.
The company had hoped that a buyer would be willing to buy Bed Bath & Beyond or Buy Buy Baby as standalone businesses, buy the brands’ intellectual property, and perhaps take over some of their better-performing stores.
“Bed Bath & Beyond has made multiple long-term transactions over the last six months, so no one should think that Bed Bath & Beyond won’t be able to do it again. On the contrary, Bed Bath & Beyond and its professionals will make every effort to salvage all or part of the operations for the benefit of all stakeholders,” Etlin added in the documents.
Further delays in the auction process could indicate Bed Bath’s willingness 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 had been postponed so it could have “more time to make sure the most value-maximizing transaction is reached.”
Stalking horse bids are now due June 8 at 5pm and final bids are now due June 14. If necessary, an auction will be held on June 16.
— CNBCs Lillian Rizzo contributed to this report.