BJ's Wholesale Club Inc may put itself up for sale, under pressure from a private equity firm that may make a hostile bid, and its shares jumped 13 percent.

The company said its board decided to explore a sale and other alternatives, and that it had hired Morgan Stanley & Co to advise it in the process, confirming media reports from early November that an evaluation was under way.

Private equity firm Leonard Green & Partners may make a hostile bid for BJ's, the New York Post reported in December. In July, a fund run by Green said it had taken a 9.5 percent stake in the company.

BJ's would be attractive to private equity, offering an opportunity to increase margins and profit from a strong food and grocery business that is gaining market share, said Walter Stackow, an analyst at Manning & Napier, which has been a long-term investor in BJ's.

BJ's is a business that has potential to expand margins, and they can attract private equity because it generates a lot of cash, he said. Food inflation could potentially become a tailwind for BJ's grocery business.

Stackow said a competitor or supermarket would be a less likely buyer.

Janney Capital Markets analyst David Strasser estimates the take-out price for BJ's in the low- to mid-$50 per share range, compared with its close at $43.01 on Wednesday.

We believe that going private makes sense due to the potential for a national store roll-out, he said in a research note.

The company could go private and accept earnings dilution, while preparing a national roll-out by entering a variety of markets beyond its core markets (i.e. the Northeast and Southeast), and come back public as a growth company, added Strasser, who has a buy rating on the stock.

BJ's said sales at stores open at least a year rose 0.3 percent in January, excluding gasoline sales, hurt by snow in the Northeast and Mid-Atlantic regions, where its stores are concentrated.

Last month, BJ's, which competes with Wal-Mart Stores Inc's Sam's Club and Costco Wholesale Corp , announced plans to close five stores, restructure some operations and bring in fresh management. Stackow said a buyer could close more weak stores.

One retail investment banker, who declined to be named because he was not authorized to speak to the media, said he doubted BJ's efforts to find a buyer would succeed.

The banker said Leonard Green, which has shown interest in the company, has since agreed to buy Jo-Ann Stores Inc and participate in the buyout of J Crew Group Inc and may not have interest in taking on another retailer.

They may have decided to disclose the sale process finally to flush out another bidder and conduct a thorough auction, said the banker, who was not involved in the auction.

BJ's said on Thursday that it has not decided to pursue any specific option and there is no timetable for the process.

The wholesale club said it will not provide updates or make further comments about the process unless a specific action is recommended by a committee of independent directors or the process is concluded.

BJ's shares were up 13 percent to $48.63 in midday trading on the New York Stock Exchange.

(Reporting by Ben Klayman, additional reporting by Phil Wahba in New York, Jessica Wohl and Jessica Hall; editing by Derek Caney, Dave Zimmerman and John Wallace)

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