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PetSmart, Inc.

 

 

AVR Status

PetSmart reported voting approval on March 6, 2015 by 74.4% of outstanding shares for the company's definitive agreement to be acquired by a consortium led by BC Partners, with the participation of existing shareholder Longview Asset Management, at a price of $83.00 per share, as presented in the company's February 2, 2015 Definitive Proxy Statement, and the merger became effective on March 11, 2015. Based on its review of suitability, the Forum will offer support of shareholders who reserved rights to consider appraisal for realization of the company's intrinsic value.

 

Forum distribution:

Anticipated buyout pressed by activist and supported by participating stockholder

 

The article below is the original version as it was distributed to Forum participants. For the final version with its author's video commentary, click here.

For the referenced company announcement of the agreement, see

 

Source: Bloomberg, December 14, 2014 article

Bloomberg.com   Businessweek.com


Bloomberg

PetSmart Agrees to Be Bought by BC Partners for $8.3 Billion

By David Welch | Dec 14, 2014 6:51 PM ET

 

Photographer: Victor J. Blue/Bloomberg

Cats for adoption sit in cages at a PetSmart Inc. store in New York. Same-store sales at the pet-supply company were flat last quarter after falling in the previous three months for the first time in at least a decade, as competition from Amazon.com Inc. and other retailers intensified.

PetSmart Inc. (PETM) agreed to be bought by a group led by BC Partners Inc. for about $8.3 billion in the largest leveraged deal for a U.S. company this year.

The group will pay $83 a share, or about 39 percent more than the company’s price on July 2, before activist investor Jana Partners began pushing for the sale, according to a statement today. Including debt, the total value of the deal is about $8.7 billion, according to the statement.

BC Partners beat other bidders including Leon Black’s Apollo Global Management to close the deal after a weeks-long auction that came down to negotiations over the weekend. People with knowledge of the matter said on Dec. 13 that Apollo was nearing a deal that valued PetSmart at about $8 billion.

“It was a very competitive auction,” Raymond Svider, a managing partner at BC Partners said in a telephone interview. “The company should never have been put in play. Growth slowed and the market overreacted. We feel fortunate.”

A spokesman for Apollo declined to comment, as did a representative for Jana. In addition to BC Partners, the consortium includes Caisse de Dépôt et Placement du Québec and StepStone.

Jana Victory

The sale is a victory for Jana and Longview Asset Management which also urged the retailer to sell itself as its business waned. Same-store sales at the pet-supply company were flat last quarter after falling in the previous three months for the first time in at least a decade, as competition from Amazon.com Inc. and other retailers intensified.

Until Jana, the $10 billion hedge fund run by Barry Rosenstein, began its campaign on July 3, PetSmart’s shares had tumbled 18 percent in 2014. Longview, which controls about 9 percent of PetSmart, said later that same month that it also backed a sale. Longview supports the sale to BC Partners according to the statement.

Shares of Phoenix-based PetSmart have now gained 6.8 percent this year, closing at $77.67 on Dec. 12, compared with an 8.3 percent gain in the Standard & Poor’s 500 Index.

Relative Value

Including debt, the buyout group is paying about 9.3 times PetSmart’s earnings before interest, taxes, depreciation, and amortization in the 12 months through November, data compiled by Bloomberg show. That compares with a median of 8.9 times historic Ebitda paid in 24 buyouts of U.S. consumer companies over $1 billion in the last five years.

The private-equity deal tops Blackstone Group LP (BX)’s $5.4 billion purchase of industrial-products maker Gates Global LLC in July, data compiled by Bloomberg show. Buyout firms have held off on making purchases this year, as valuations climb with stock benchmarks that have reached records.

PetSmart made a good buyout candidate because of its high free-cash-flow yield -- a measure of how much cash from operations the business generates relative to its share price, analysts have said. Petco Animal Supplies Inc., a PetSmart competitor, was acquired by private-equity investors led by Leonard Green & Partners LP in 2006, and buyout firms also may be interested in PetSmart, thanks in part to an attractive financing market, Jana said in July.

To contact the reporter on this story: David Welch in New York at dwelch12@bloomberg.net

To contact the editors responsible for this story: Kevin Miller at kmiller@bloomberg.net Mohammed Hadi, Bruce Rule 


©2014 Bloomberg L.P. All Rights Reserved

 

 

 

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