Farm and Ranch giant buys Petsense

Farm-and-ranch industry leader Tractor Supply has always been interested in the pet business, and it even operates two standalone HomeTown Pet stores in Tennessee.

But with the acquisition of Petsense, LLC, Tractor Supply is looking to take a big bite out of what it calls a $60 billion retail segment.

Tractor Supply said Thursday that it has acquired 100% of Petsense, LLC, a leading specialty retailer of pet supplies and services with 136 stores in 25 states.

The transaction price was approximately $116 million, net of acquired estimated future tax benefits of $29 million.

Petsense will operate as a subsidiary of Tractor Supply Company from Petsense's current headquarters in Scottsdale, Arizona and will continue to be led by members of Petsense's senior management team.

Tractor Supply plans to continue to grow the Petsense store base at a target rate of 15% to 20% annually and will convert its two existing HomeTown Pet stores to Petsense stores.

"We are excited about the addition of Petsense to the Tractor Supply family as we develop our pet specialty retail business,” said Greg Sandfort, Tractor Supply’s CEO. “The pet industry represents a $60 billion market driven by favorable pet ownership trends and the continued humanization of pets by their owners. We believe the pet specialty industry is an attractive expansion opportunity and, with 136 stores across 25 states, we think Petsense is an excellent complement to our Tractor Supply retail operations."

Mr. Sandfort continued, "With Tractor Supply's success in the pet category and the knowledge gained from our HomeTown Pet stores, we determined that the acquisition of an established, successful concept with a proven track record of growth would be the best way to capitalize on the opportunities in the pet market. We believe the Petsense team's expertise in growing smaller format pet specialty stores combined with our proven expertise in the category as well as site selection and store growth, will enable us to accelerate the growth of our pet specialty retail business and enhance long-term shareholder value."

Bob Angstead, President and Chief Executive Officer of Petsense stated, "As we looked at the future for Petsense, we recognized Tractor Supply Company as a natural fit to continue our growth. The Tractor Supply team has a strong culture, and we share many of the same values, as well as an appreciation of the opportunities presented by smaller towns and communities. Additionally, the Tractor Supply team has the experience and resources to help expand Petsense to the many untapped markets across the country."

The acquisition was a cash transaction financed with cash-on-hand and revolver debt. The transaction, including transaction and integration costs, is not expected to be material to Tractor Supply's net earnings per diluted share for fiscal 2016.