Private-equity firms in many cases have been outbid by corporate buyers hungry for acquisitions.
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Petco announced on Monday it had reached a deal to sell itself to private equity firm CVC Capital Partners Ltd. and Canadian Pension Plan Investment Board for approximately $4.6 billion, according to a release from the retailer.
The ownership change is the latest development in Petco’s growth journey.
“We are delighted to have been associated with the Petco team over many years of uninterrupted progress and success and we are tremendously appreciative of CEO Jim Myers and retired CEO and Chairman Emeritus, Brian Devine, and the rest of the Petco team for the outstanding job they’ve done for our investors”, said John G. Danhakl, managing partner of Leonard Green & Partners.
It is clear that Petco was a multi-billion dollar victor for its private equity owners. PetSmart was facing criticism about its performance from activist shareholder Jana Partners.
A Petco spokeswoman said the company plans to keep its headquarters in San Diego.
Net income jumped about 43 per cent and had over $2 billion in debt, according to the filing.
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These moves are also a reflection of the high level of competition these days, with general retailers like Target and even grocery stores getting into the pet supplies business. Overall, just over half of Petco’s sales come from supplies, 38 per cent come from pet food. The remaining 8 per cent comes from services such as grooming, and other activities. Petco has a well-known brand and a strong position in the US pet sector. Pet suppliers tend to be domestically owned around the world, notes IBISWorld, and globalization is low for this industry. Now you have to go back down memory lane, back in the private equity hay-day years. And Ares Management LP acquired USA animal hospital group National Veterinary Associates for an estimated $900-million. The deal is expected to close in early 2016.
