The history behind the deal

Boasting a sales volume of over $55 bn, the pet supplies sector is anything but a lightweight in the US economy. What makes the sector so attractive is its low susceptibility to financial crises, with sales of pet products continuing to rise even during the last recession. This resilience makes the pet sector an increasingly attractive target for financial investors.
Fierce competition
The fierce bidding contest between a number of private equity companies courting the favour of the leading US pet store chain PetSmart underlines the significance of the pet supplies sector in the USA. A consortium headed by BC Partners succeeded with its $8.7 bn offer, seeing off heavyweight rivals such as Apollo Global Management and KKR. The transaction was the biggest private equity deal announced globally in 2014. The investors will pay $83 per share, a 39 per cent premium over PetSmart's stock price before it began exploring a possible sale in early July. In the view of George Puro, pet market analyst at the US market research company Packaged Facts, the takeover is "a vote of confidence for an industry with stable cash flow and a devoted customer base". One of the main shareholders agitating for PetSmart's sale, Longview Asset Management, is retaining about a third of its share in the new deal.

BC Partners portray themselves as concentrating on the acquisition of large companies with a steady growth profile and low cyclical fluctuations, and PetSmart fits in with this concept. BC Partners have stressed that they look forward "to working with management to continue growing PetSmart's business and executing against its recently announced strategic initiatives".
Weak e-commerce arm
It came as no surprise to analysts that the USA's leading pet store chain with nearly 1 400 outlets in the USA and Canada and a raft of service offers such as pet boarding, grooming, training and adoption would face changes in its shareholder structure. The share price of the company fell by up to 18 per cent at the start of last year. Sales and the net income of the company in the previous year were also flat. PetSmart is coming under strong pressure from Internet giants such as Amazon and the leading supermarket chain Wal-Mart too. To strengthen its e-commerce offering, the Phoenix-based…