By  on March 20, 2006

NEW YORK — A peek into a recent Securities and Exchange Commission filing by Burlington Coat Factory offered more than a glimpse into what led up to its acquisition by Bain Capital Partners for $2.06 billion. The filing also revealed how companies have changed the way they put themselves up for sale and showed how quickly the bidding process can move.

BCF hired an adviser and then focused on a short list of potential bidders, inviting them to kick the tires. This differs from prior methods, which often involved creating a formal prospectus, or "book," on the company.

The bid process for BCF began about a year ago, when the board of directors discussed the possibility of BCF "seeking strategic alternatives." The retailer hired Goldman Sachs as its financial adviser and Hughes Hubbard & Reed LLP as its legal counsel.

In the SEC filing, BCF said it consulted its advisers about putting itself up for sale. "Beginning in August 2005, Goldman Sachs, at the direction of the board of directors, contacted on behalf of the company and on a confidential basis more than 40 prospective bidders, 30 of whom expressed interest in participating in the process and were provided with materials containing publicly available information concerning the company," the retailer said in the filing.

BCF said there were "two possible corporate bidders" who were not invited into the process "because they were competitors of the company and their inclusion in the process and access to competitive information could, in management's view, among other things, have a very damaging effect on the company."

But BCF said it contacted other strategic bidders. "Of the prospective bidders contacted by Goldman Sachs, 22 negotiated and entered into confidentiality agreements with the company for the purpose of facilitating the delivery of confidential information," BCF said in the filing, adding that Bain Capital was one of the 22 bidders.

Following the retailer's annual meeting, Goldman Sachs sent letters to the 22 prospective bidders "inviting preliminary indications of interest by Oct. 17, 2005."

As the deadline approached, the competition intensified; BCF got four preliminary indications of interest. "Of the 22 prospective bidders, two parties [Bain Capital and a second party referred to as Bidder 2] submitted indications of interest individually and four parties formed two groups, consisting of two parties each. Each group [referred to below as Bidder 3 and Bidder 4] submitted an indication of interest. All of the preliminary indications of interest contemplated the acquisition of the company in a cash transaction."Three days later, after reviewing the letters of interest, Goldman Sachs "recommended that the company invite all the preliminary bidders to move to the next round of the board's process of exploring strategic alternatives and proceed with due diligence." BCF did just that.

The retailer then set Jan. 10, 2006, as a deadline for the "definitive proposals." At the same time, BCF made presentations to the management of the prospective bidders. "In early November 2005, Bidder 4 informed Goldman Sachs that it had determined not to proceed further in the process," BCF said in the filing, adding that Bain Capital, Bidder 2 and Bidder 3 were asked for definitive proposals, "along with a draft merger agreement prepared by Hughes Hubbard."

On Dec. 28, 2005, Bidder 3 backed out. On Jan. 10, Bain's bid stood at $43.65 a share. "Bidder 2 (together with a real estate partner) submitted a definitive proposal to acquire the firm in a cash merger for $42 per share.

"On Jan. 13, 2006, Bidder 2 withdrew from the negotiations after informing Goldman Sachs that it was prepared to pay only up to, but not more than, $43 per share in cash to acquire the company," BCF said in the filing.

What followed was an intense negotiating period that involved non-compete issues and other factors, which ended up driving the bid price up. "Shortly thereafter, representatives of Bain Capital informed Goldman Sachs that Bain Capital was prepared to increase the proposed merger price to $45.50 per share in cash, provided that all remaining contractual issues were resolved to its satisfaction. The parties then continued their negotiations through the night of Jan. 16, 2006 and into Jan. 17, 2006," BCF said in the filing.

A day later, a merger agreement was inked.

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