Will BJ's Wholesale Finally Go Private?

It's been in the rumor mill for what seems like forever, and today is no different.

The NY Post is reporting that CVC Capital Partners and Leonard Green & Partners are going to team up to buy BJ's Wholesale (NYSE: BJ) for $2.8 billion.

The bid is expected to come next week, and would only be a 7% premium over yesterday's closing price. Leonard Green's name has been attached to BJ's for what seems like forever. The Los Angeles-based private equity firm owns 10% of the company already, so the relationship is already there for a potential takeover.

After going on a buying spree earlier this year, the question is whether Leonard Green will be able to put the cash up for a buyout. According to one investment banker, "The critical question has been whether Leonard Green has the funds to do a deal." Leonard Green would be "a lot more comfortable putting up about half."

Traders should watch options in BJ's to see if there is any real action this time. Generally where there is smoke, there is fire, and the relationship between Leonard Green and BJ's is well known, and a deal makes sense. What does not make sense is a 7% premium to yesterday's close, as shares have done nothing since the rumors came out in February. Shares have lost less than 1% since the beginning of the year, so a bid of around $3 billion or more seems more reasonable than $2.8 billion.

Shares are up around 3% in pre-market trading.