PetSmart (PETM) Sells Itself for $8.7 Billion

Shares of PetSmart Inc. (PETM) were up +3.58 or +4.61 percent to $81.25 per share in Monday's premarket, after the company announced yesterday that it was being acquired by a foreign based private investor group for $83.00 per share. PetSmart shares closed at $77.67, down -0.77 or -0.98 percent in Friday's regular session.

Phoenix, Arizona based PetSmart Inc. was founded in 1986 opening its first two stores in Phoenix under the PetFood Warehouse name.
The company has since grown exponentially, operating more than 1,350 stores throughout the United States, Canada and Puerto Rico, offering a wide variety of animals for pets and pet supplies. In addition, the company offers services such as dog training, grooming, cat and dog boarding facilities and daycare. PetSmart earned $419.5 million in fiscal 2014 and employs more than 54,000 people.

London, UK based BC Partners is a private equity firm originally founded as Baring Capital Investment Ltd in 1986. The company has approximately $15 billion under management and finances buyouts and acquisitions in the United States and Europe. The company invests across all industries with offices in New York, Paris, Hamburg and Milan.

The $8.7 billion deal represents a seven percent premium over PetSmart stock's closing price on Friday. The selling of the company to BC Partners is the culmination of the PetSmart's search for options in an increasingly competitive environment. Gregory P. Josefowicz, Chairman of PetSmart said that, "This transaction represents the successful conclusion of our extensive review of strategic alternatives."

PetSmart first indicated a sale in August, when an activist investor group, Jana Partners announced it had acquired a significant stake in the company. Jana Partners currently owns a 9.75 percent stake in the company, exceeding Longview Asset Management's stake, which has a nine percent stake in PetSmart.

David K. Lenhardt, President and Chief Executive Officer of PetSmart stated in the company's press release that "This transaction is a testament to the strength of the PetSmart brand and franchise and reflects the dedication and commitment of our 54,000 associates to serving our customers and delivering value for our company and our shareholders. The consortium led by BC Partners will be an excellent partner for PetSmart as we continue to implement our strategic plan to capitalize on our opportunities for growth and meet the needs of pet parents."

Raymond Svider, a Managing Partner at BC Partners said "We are very pleased to add PetSmart to our portfolio of investments. PetSmart is an iconic brand and the category leader in the growing pet retail industry. We look forward to working with management to continue growing PetSmart's business and executing against its recently announced strategic initiatives".

The transaction is expected to close by the first half of 2015 pending approval from regulators and shareholders. PetSmart stock is already two points under the $83 offer price and will probably trade slightly under that level until the deal is finalized.

Other News About PetSmart
Paulson & Co. opens a new position in PetSmart
The position accounts for 1.2% of Paulson's third quarter portfolio.
Although Competition Is Increasing, PetSmart Will Outperform
Article examining PetSmart's position in the industry.

Other Stocks in the News
Amazon UK glitch sells thousands of products for a penny
Amazon subsequently cancelled most of those transactions.
Alibaba's Taxi App Soars, Goldman Sees Great Promise In O2O
Company's Taxi App meets with considerable success in China.

Published on Dec 15, 2014
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2016. Content published with author's permission.

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