PetSmart To Be Acquired By BC Partners-led Consortium In $8.7 Bln Deal

(RTTNews) - Pet supplies retailer PetSmart Inc. (PETM) said Sunday that it has agreed to be acquired by a consortium led by private equity firm BC Partners Inc. in a deal valued at about $8.7 billion. The acquisition of PetSmart is the largest leveraged deal for a U.S. company this year.

Gregory Josefowicz, Chairman of PetSmart said, "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. This transaction represents the successful conclusion of our extensive review of strategic alternatives."

Phoenix, Arizona-based PetSmart said in August 2014 that it will explore strategic alternatives, including a possible sale of itself. PetSmart had been under pressure from activist investor and hedge fund Jana Partners LLC as well as other shareholders to sell itself. Jana Partners, in July, revealed a 9.9 percent stake in PetSmart.

Media reports last week had indicated that New York-based Apollo Global Management LLC (APO) was nearing a deal to buy PetSmart. Apollo was said to be in late-stage talks to buy PetSmart for about $8 billion. This followed an auction process over the past few weeks. However, BC Partners reportedly beat other bidders to close the deal.

Under the terms of the deal announced on Sunday, PetSmart will be acquired by the BC Partners-led consortium for $83.00 per share in cash. This represents an about 39 percent premium to PetSmart's unaffected closing share price of $59.81 on July 2, 2014.

The consortium includes funds advised by BC Partners, alongside several of its limited partners, including Canada-based institutional fund manager La Caisse de dépôt et placement du Québec and StepStone.

Longview Asset Management, which owns or manages about 9 percent of PetSmart's outstanding shares, has committed to vote in favor of the transaction.

PetSmart noted that Longview Asset Management will participate in the consortium only with respect to about one-third of its holdings, while the balance of its holdings will receive the same $83.00 per share consideration that other PetSmart shareholders will receive.

The transaction, unanimously approved by PetSmart's board, is subject to shareholder and regulatory approval. 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 employs about 54,000 associates and operates about 1,387 pet stores in the U.S., Canada and Puerto Rico. The company also operate about 201 in-store PetSmart PetsHotel dog and cat boarding facilities.

In mid-November, PetSmart reported a profit for the third quarter that was essentially flat with the year-ago period, as higher costs and expenses offset an almost 3 percent increase in sales. Same-store sales for the quarter were also flat.

Founded in 1986, BC Partners principally invests in larger businesses in the region and selectively in North America through its network of offices in London, Paris, Hamburg and New York. Since its inception, BC Partners has completed 85 acquisitions with a total enterprise value of 88 billion euros.

J.P. Morgan Securities LLC is serving as the exclusive financial advisor to PetSmart, while 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.

PETM closed Friday's trading at $77.67, down $0.77 or 0.98 percent on a volume of 833,052 shares.