PetSmart to Be Sold for $8.7 Billion

PetSmart to Be Sold for $8.7 Billion
Image credit: Reuters | Rick Wilking

Free Book Preview Entrepreneur Kids: All About Money

Submit your email to get a sneak peek of some of the fun, educational worksheets included in our NEW book for the little entrepreneur in your life.
3 min read
This story originally appeared on Reuters

Pet supply retailer PetSmart Inc succumbed to calls from some shareholders for a sale on Sunday with an agreement to be bought by a private equity consortium led by BC Partners Ltd for $8.7 billion, in the largest leveraged buyout of the year.

At a time when a stock market rally has made private equity firms reluctant to take companies private for fear of overpaying, the deal illustrates how activist investors have the potential to drive corporate boards to explore such deals and accept a price that makes a leveraged buyout possible.

Activist investor Jana Partners LLC began pushing for a sale after disclosing a 9.9 percent stake in PetSmart in early July.

PetSmart said BC Partners, as well as some of its fund investors, including La Caisse de dépôt et placement du Québec and StepStone, signed an agreement to buy the company for $83 per share. Longview Asset Management, which has a 9 percent stake in PetSmart, will roll a third of its holding into the deal.

Jana paid less than $55 per share on average for its percent stake in PetSmart, according to regulatory filings.

The buyout price represents a 39 percent premium to PetSmart's closing price of $59.81 on July 2, the day before Jana disclosed its stake and called for PetSmart to explore a sale.

PetSmart shares on Friday closed at $77.67.

Phoenix-based PetSmart, which has about 54,000 employees and operates 1,387 pet stores, said in August it would explore a potential sale of the company.

PetSmart faced mounting investor pressure at a time when fierce competition from large retailers, including Wal-Mart Stores Inc and Amazon, is squeezing specialty stores.

Last month, PetSmart reported flat third-quarter net income of $92.2 million as net sales rose 2.6 percent to $1.7 billion.

Buyout firms KKR & Co LP and Clayton, Dubilier & Rice LLC had also teamed up to bid for the company, Reuters reported last month. Apollo Global Management LLC, another buyout firm, had also vied for PetSmart, according to people familiar with the matter. Representatives for these private equity firms declined to comment.

J.P. Morgan Securities LLC and Wachtell, Lipton, Rosen & Katz advised PetSmart. BC Partners and its partners were advised by Simpson Thacher & Bartlett LLP and Ernst & Young. Longview was advised by Skadden, Arps, Slate, Meagher & Flom. Citigroup, Nomura, Jefferies, Barclays and Deutsche Bank have committed to finance the acquisition with debt.

(Reporting by Greg Roumeliotis in New York; Editing by Paul Simao and Leslie Adler)

More from Entrepreneur
Our Franchise Advisors are here to help you throughout the entire process of building your franchise organization!
  1. Schedule a FREE one-on-one session with a Franchise Advisor
  2. Choose one of our programs that matches your needs, budget, and timeline
  3. Launch your new franchise organization
Discover the franchise that’s right for you by answering some quick questions about
  • Which industry you’re interested in
  • Why you want to buy a franchise
  • What your financial needs are
  • Where you’re located
  • And more
Whether you want to learn something new, be more productive, or make more money, the Entrepreneur Store has something for everyone:
  • Software
  • Gadgets
  • Online Courses
  • Travel Essentials
  • Housewares
  • Fitness & Health Devices
  • And More

Latest on Entrepreneur