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PetSmart will fetch $8.7 billion from a private equity consortium

December 15, 2014 12:40 PM
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The hunt for a new owner for pet supplies and services chain retailer PetSmart Inc. is over.

PetSmart, No. 362 in the Internet Retailer 2014 Top 500 Guide has agreed to be acquired by a consortium led by London-based BC Partners Inc. in a deal  valued at $8.7 billion. Other members of the consortium include La Caisse de dépôt et placement du Québec, which manages public pension plans in the Canadian province of Quebec, and StepStone, a private equity firm based in New York.

BC Consortium is paying $83 per share to acquire the company. PetSmart announced in August it was seeking a buyer as one strategic option it was exploring. PetSmart expects BC Consortium to close the deal sometime in the first quarter but the transaction is subject to a regulatory review, the company says. “This transaction represents the successful conclusion of our extensive review of strategic alternatives,” says PetSmart chairman Gregory P. Josefowicz.

PetSmart in August acquired Pet360, which operates several sites selling various kinds of pet supplies and has an advanced e-commerce technology platform and pet-related content, for $130 million in cash and up to $30 million more in future performance-based payments.

Going forward with the Pet360 deal as a driver, PetSmart will look to grow its e-commerce operation through diversification, PetSmart CEO DavidLenhardt told analysts in November on the company’s third quarter earnings call transcribed on SeekingAlpha.com. “We are again very excited about that acquisition and our intent is absolutely to keep the front-end separate, they [Pet360] would bring us three e-commerce sites along with six content sites and we really like what that will bring us over time in terms of engagement with our customers.” 

For the first nine months of the year PetSmart reported:

  • Merchandise sales of $4.557 billion, up 1.2% from $4.502 billion in the prior year.
  • Total sales, which include store, e-commerce and other services sales, increased 1.7% to $5.198 billion from $5.111 billion.

Net income was $294 million, up 2.1% compared with $288 million in the first nine months of 2013.PetSmart did not break out year-to-date comparable-store or e-commerce sales.

The pet supplies retail market has been especially active with e-commerce acquisitions this year. Retail chain Petco Animal Supplies Inc. (No. 257) in November announced plans to acquire Drs. Foster & Smith (No. 135). The purchase price was not disclosed.

Drs. Foster & Smith has been a direct marketer of pet supplies, medicine and related products since 1983. The company has been selling online since 1996.

 

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