Deal of the Week: Investment Group to Buy PetSmart for $8.7B

Announcement Date  December 14, 2014 Acquirer  Investment Group led by BC Partners Acquirer Description  European‐American PE firm with ~$15B under management Target Company  PetSmart, Inc. (Nasdaq: PETM) Target Description  Operates as a specialty retailer of products, services, and solutions for pets in the United States, Puerto Rico, and Canada  Founded in 1986 and headquartered in Phoenix, Arizona Target Financial  Mkt Cap: $8.1 billion  LTM EBITDA: $953.5 million Statistics  EV: $8.1 billion  LTM EV / Revenue: 1.1x  LTM Revenue: $7.0 billion  LTM EV / EBITDA: 8.5x Price / Consideration  Price: $8.7 billion  Consideration: Cash Target Advisor  JPMorgan Chase Rationale  PetSmart has long been seen as a good target for private equity firms, given its relatively strong cash flow and low debt  “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,” Gregory P. Josefowicz, PetSmart’s chairman, said in a statement. “This transaction represents the successful conclusion of our extensive review of strategic alternatives.” Deal Points  The consortium will pay about $83 a share in cash, about 6.8% higher than PetSmart’s closing price on Friday and about 39% higher than the closing price on July 2, the day before Jana emerged as a shareholder  Longview Asset Management, which owns a stake of roughly 9% in PetSmart, will roll over about a third of its holdings into the newly private retailer, cashing out the rest of its shares  Citigroup, Nomura, Jefferies, Barclays and Deutsche Bank provided debt financing Of Note  The deal represents the biggest leveraged buyout of an American company in a year that has been defined by huge mergers — most of which have been by corporate buyers, not private equity firms  The retailer disclosed in August that it was exploring a sale after Jana Partners, the big activist investor, emerged as a major shareholder; the pet supply company had already been weighing its strategic options as its sales had begun to slow  The monthslong auction of PetSmart eventually drew the interest of some of the biggest private equity firms, including Apollo Global Management, Kohlberg Kravis Roberts and Clayton Dubilier & Rice

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