Phoenix – PetSmart Inc. has agreed to be purchased for about $8.7 billion by a consortium of buyers led by private equity firm B.C. Partners and also including pension fund manager La Caisse de dépôt et placement du Québec and private equity firm StepStone. The total figure represents an acquisition price of $83 per share, a 39% premium over PetSmart’s closing price on July 2, 2014.
The acquisition, which marks the largest private equity buyout of 2014, follows a review of strategic alternatives undertaken by the PetSmart board of directors which began in summer 2014. The transaction was unanimously approved by the PetSmart Board and is subject to shareholder and regulatory approval and other customary closing conditions. The consortium has received fully committed debt financing in connection with the transaction. The transaction is expected to close in the first half of 2015.
PetSmart had seen its stock value subside in the first half of 2014, but once activist investor Jana Partners began pressuring the retailer to sell itself in July, share value rebounded. PetSmart introduced a $200 cost-cutting plan this year, although its current guidance does not call for any significant sales growth in fiscal 2015. In PetSmart’s most recent financial quarter, the retailer had flat net income and net sales growth of about 3%.
"We are pleased to have reached this agreement with BC Partners, which maximizes value for all of our shareholders and best positions PetSmart to continue to meet the needs of pet parents," said Gregory P. Josefowicz, chairman of PetSmart. "This transaction represents the successful conclusion of our extensive review of strategic alternatives."
J.P. Morgan Securities LLC is serving as the exclusive financial advisor to the company, and Wachtell, Lipton, Rosen & Katz is serving as the company’s legal advisor. BC Partners and its consortium investors were advised by Simpson Thacher & Bartlett LLP and Ernst & Young. Longview was represented by Skadden, Arps, Slate, Meagher & Flom. Citigroup, Nomura, Jefferies, Barclays and Deutsche Bank, have underwritten the debt package to finance the acquisition.