Wal-Mart's Behind the Scene Deal Hunt

Wal-Mart has been quiet on the deal front, but busy behind the scenes.

Walmart Home Office
Source: Walmart
Walmart Home Office

Wal-Mart International CEO Doug MacMillon spoke this week at Goldman Sachs’ annual retail conference about Wal-Mart’s overall growth prospects and priorities, saying:

“Our priority starts with comp store sales… But from an M&A [mergers and acquisitions] point of view, what we want to do is build scale in some of the existing markets that we're in today."

Throughout the presentation, MacMillon noted those markets to be Brazil, China, and Japan—piquing further speculation about whether a deal for Carrefour’s Brazil operations or Tesco’s Japanese stores would be in the work.

But Wal-Mart’s been seen sniffing around some deals here in the U.S.—which makes sense, as same-store U.S. sales, down nine consecutive quarters, seem to be the gaping growth hole.

Sources tell me Wal-Mart this spring put together a bid for BJ’s Wholesale Club that, according to a preliminary proxy, valued BJ’s at $55 to $60 a share.

When the antitrust risk surrounding such a deal was seen as too great (An ICAP Special Siutations report calculates 48 percent of BJ’s stores are within 10 miles of a Walmart-owned Sam’s Club), Wal-Mart abandoned the effort in “late April.”

BJ’s Wholesale Club announced a deal in July to be taken private by buyout shops CVC Capital Partners and Leonard Green Partners for $51.25 a share. Leonard Green took a large stake in BJ’s in July 2010 that eventually prodded management to pursue a review of strategic alternatives in February 2011.

Similar to the way the investment by Ron Burkle’s Yucaipa Companies—and resultant proxy fight—led to a strategic review at Barnes & Noble, a company where WalmartWal-Mart’s interest is perhaps more surprising.

Wal-Mart signed a confidentiality agreement during Barnes & Noble’s review, a source confirmed, though it remains unclear whether a bid was submitted. The beleagurerd bookseller was set for an acquisition by John Malone-led Liberty Media to the tune of $17 a share, a deal that fell apart in recent weeks. Liberty instead agreed to take a $204 million preferred equity stake in the company—a move that sent BKS shares sliding and left the bricks and mortar bookseller vulnerable to rivals.

Interest in Barnes & Noble was suggested by some in the industry to hinge on Wal-Mart’s desire to compete more directly with Amazon.com; owning Barnes & Noble would have provided a Kindle rival in the nook, not to mention a slew of real estate.

But it looks like for now, we’re waiting. On recent deal activity, Wal-Mart spokesperson Greg Rossiter would say only that the company continues to “keep its eye on what’s out there.”

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