Bed Bath & Beyond Stores to Return in $25M Partnership With Kirkland's

By Sabela Ojea

Beyond and home-decor retailer Kirkland's have entered a partnership that will bring back physical Bed Bath & Beyond stores more than a year after the retailer filed for bankruptcy.

Midvale, Utah-based Beyond, which owns the Bed Bath & Beyond, Overstock and Zulilly brands will invest $25 million in Kirkland's in a combined debt and equity transaction, in exchange of a licensee agreement for new, smaller format Bed Bath & Beyond locations across the U.S., the companies said Monday. Kirkland's will become the exclusive brick-and-mortar operator of Beyond while the companies work to cut costs and improve inventory management.

The agreement comes less than a week after Beyond said it was investing $40 million in The Container Store, providing the struggling retail chain a financial lifeline while returning some Bed Bath & Beyond products back to retail locations.

As part of the deal, Beyond will provide Kirkland's with a $17 million term loan credit that would allow it to repay its existing loan with Gordon Brothers. Half of the loan will be convertible into Kirkland's shares.

Following the closing of a common-stock purchase, Beyond will have the right to nominate two independent directors to Kirkland's board, so long as it retains a 20% stake in Kirkland's. Beyond also will be able to designate a board appointment if it owns at least 5% of Kirkland's common stock.

Beyond and Kirkland's have also entered into a seven-year collaboration agreement under which Beyond will earn a fee equal to 0.25% of Kirkland's quarterly retail and e-commerce revenue, starting in Kirkland's first fiscal quarter of fiscal 2025.

Beyond will receive an incentive fee equal to 1.5% of Kirkland's incremental growth in e-commerce revenue, and earn a store-royalty fee equal to 3% of net store sales generated under the Bed Bath & Beyond banner, with the rate increasing to 5% after the collaboration agreement has terminated, if the locations are still operating.

"An omnichannel approach to Bed Bath & Beyond is quintessential to its success," Beyond Executive Chairman Marcus Lemonis said.

Osmium Partners, who owns about 9% of Kirkland's shares outstanding, has agreed to support the transaction at the upcoming Kirkland's special meeting of shareholders.

Write to Sabela Ojea at sabela.ojea@wsj.com; @sabelaojeaguix

(END) Dow Jones Newswires

October 21, 2024 08:20 ET (12:20 GMT)

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