Private Equity Bidding War for PetSmart Shows Confidence in Pet Market

Press Release
Dec 17, 2014
Rockville (MD), December 17, 2014 — Sales growth may have slowed (relatively speaking) in the pet market, but interest in the industry reached a fever pitch over this past weekend with several private equity firms bidding to acquire pet superstore chain PetSmart. The winner was a $8.7 billion offer from a consortium led by private equity firm BC Partners, which beat out heavyweights Apollo Global Management and KKR. The offer of $83 per share represents a 39% premium over PetSmart’s prior closing share price.

As Packaged Facts pet market analyst George Puro sees it, “This is a vote of confidence for an industry with stable cash flow and a devoted customer base.” In fact, one of the main shareholders agitating for PetSmart’s sale, Longview Asset Management, is retaining about a third of its share in the new deal.

BC Partners has said it looks forward “to working with management to continue growing PetSmart’s business and executing against its recently announced strategic initiatives.”

BC Partners invests in companies with defensive growth characteristics, and several of PetSmart’s strategies fit this mold. For example, PetSmart focuses on proprietary and exclusive brands, which account for 28.5% of merchandise. And PetSmart is recalibrating its pet food mix to include more grocery and mass brands to better compete with those channels (even as mass retailers return the favor).

In July 2014, activist hedge fund Jana Partners, which with a 10% stake in PetSmart ranked as the company’s biggest shareholder, asked PetSmart to conduct a financial review of its options and consider a sale, citing financial underperformance. Jana has specifically criticized PetSmart’s performance in e-commerce, which now accounts for 4% of pet product sales in the U.S., according to Packaged Facts estimates. Longview Asset Management, with a 9% stake in PetSmart, responded by backing the Jana Partners recommendation. In August 2014, PetSmart publicly responded by announcing that it was exploring its options, including the possibility of a sale, “[n]otwithstanding our confidence in the Company’s future prospects.”

Combined, the pet superstore chains PetSmart and Petco account for 20% of all pet product sales in the U.S. Though the progress of these two rivals slowed during the recession, both chains picked back up in 2011 and have continued to expand at a steady clip, with more than 2,600 stores between them as of 2014. Packaged Facts data show PetSmart as the second-leading retailer of pet products in the U.S., ranked by its draw among pet product shoppers.

About Packaged Facts -- Packaged Facts, a division of, publishes market intelligence on a wide range of consumer market topics, including consumer demographics and shopper insights, consumer financial products and services, consumer goods and retailing, consumer packaged goods, and pet products and services. Packaged Facts also offers a full range of custom research services. To learn more, visit: Follow us on Facebook, LinkedIn, Twitter, and Google+.

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