Group led by BC obtains PetSmart in deal worth $8.7b

The specialty North American pet retail group, PetSmart Inc, has agreed to being sold for about $8.7b, including debt.

The buyers are led by the private equity London-based BC Partners Inc, along with Step Stone and La Caisse de depot et placement du Québec.

This is the largest private equity buyout for 2014 so far and comes after an auction process which commenced last summer.  

The $83 per share sale price reflects a premium of 39% on its closing price of July 2, which was the day before Jana Partners disclosed its 9.9% stake.  Earlier reports stated that Apollo Global Management may be the winning bidder at $7.72bn, but the offer from the BC-led group was above all the others.

Longview Asset Management, the firm which manages and owns around 9% of PetSmart’s outstanding shares, has given a commitment to vote for the sale.  The president and CEO of Longview, James A Star, said the sale is an excellent final result for the company’s shareholders.  The president and CEO of PetSmart, David K Lenhardt, said this deal indicates the strength of the brand.  He added that the BC-led consortium will be a good partner for the company in their continued implementation of their strategic plan for growth.  

The company experienced stagnation in their third-quarter income, after a decline during the previous quarter for the first time in several years.  Analysts blamed this result on competition from Amazon and Walmart.

PetSmart’s exclusive financial advisor for this deal is JP Morgan Securities LLC, with Wachtell, Lipton, Rosen & Katz acting as its legal advisor.  Ernst & Young and Simpson Thacher & Bartlett LLP acted as advisors for BC Partners and its investors.

The acquisition debt has been underwritten by Deutsche Bank, Barclays, Jefferies, Nomura and Citigroup and is expected to close during the first half of 2015.