SAN DIEGO (AP) — Petco Animal Supplies (PETC), the nation's second-biggest pet supplies retail chain, said Friday it has agreed to be acquired for about $1.7 billion by a private investment group.
Its shares climbed 43%.
The deal marked the latest example of the attraction that solid retail cash flows and real estate assets have for private equity investors.
The investor firms Leonard Green & Partners and Texas Pacific Group are offering $29 a share in cash for Petco, a 45% premium over its closing price of $19.45 on Thursday.
For Leonard Green, the purchase marks a something of full circle. The Los Angeles firm was a part-owner of Petco before the retailer went public in February 2002.
Shares of pet retailers have suffered amid concern about high gas prices. Petco's stock had fallen in half since January 2005.
The private equity firms likely saw investor disfavor as a buying opportunity, said David Schick, an analyst at Stifel Nicolaus & Co., a brokerage firm in New York.
"They know that there are good cycles and bad cycles," Schick said. "You want to buy when it's getting worse and sell when it's getting better."
A spokesman for the private firms, Owen Blicksilver, said the buyers declined to comment on the sale.
Petco, based in San Diego, said its board unanimously approved the proposed deal. The transaction is expected to close by this year's fourth quarter, pending shareholder and regulatory approval.
Petco shares climbed $8.44 to $27.89 on the Nasdaq Stock Market.
The buyers would also assume about $120 million in debt in the deal, Petco said. That would boost the total value of the transaction to $1.8 billion.
Petco is second only to PetSmart among the nation's biggest pet supply retailers. Petco sells pet food, supplies and services with over 775 stores in 47 states and the District of Columbia.
PetSmart (PETM), based in Phoenix, will benefit from Petco's new ownership, Schick said. He predicted that a privately owned Petco will be less inclined to cut prices to bolster sales and feel less pressure to expand. The sale will also boost the value that investors put on PetSmart.
PetSmart shares climbed 97 cents, 4.1%, to $24.44 on the Nasdaq Stock Market.
Private equity groups have made several other recent plays for other retailers.
Blackstone Group and Bain Capital agreed to acquire arts and crafts retailer Michaels Stores for $6 billion in June. Texas Pacific Group and another private equity player Warburg Pincus teamed up in 2005 to purchase luxury department store chain Neiman Marcus Group for $5.1 billion.
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The 1st Petco store in La Mesa, Calif.
1965 – UPCO founded as mail-order veterinary supplies business in San Diego, California.
1979 – UPCO becomes Petco.
1980 – First Petco store opens outside of California in Tigard, Oregon.
1988 - Petco’s dynamic growth as a major retailer starts when the company acquires two pet supply chains, WellPoint and the Pet Department, more than tripling the number of Petco stores from 40 to 130 and expanding the company’s footprint in Oregon and into Washington and Texas. Live fish are introduced in our Santa Monica, California store and other live animals quickly follow.
1991 - The company introduces Red Ruff and Blue Mews as its official logo mascots.
1992 - Petco’s first East Coast stores open in New Jersey; “Where the Pets Go” is officially introduced and becomes one of the most recognized retail brand taglines in the country.
1994 - Petco goes public as the largest pet specialty retail chain with 218 stores in 13 states and sales of more than $189 million; listed on NASDAQ under the trading symbol PETC.
1995 - Petco rolls out grooming services for customers in stores nationwide.
1997 - Petco launches Petco Animal Lovers Save – PALS – the pet industry’s first customer loyalty program.
1999 - The Petco Foundation is founded, formalizing Petco’s longstanding commitment to animal welfare.
2000 - Petco goes private in leveraged buyout by Leonard Green Partners and Texas Pacific Group.
2001 - Petco.com is launched, offering online shoppers an expansive selection of products and services.
2002 - Petco again becomes publicly traded and grows to more than 600 stores in 48 states.
2004 - The San Diego Padres open play in the beautiful new Petco Park major league ballpark in downtown San Diego. With a strong commitment to elevating animal care standards across the industry, Petco introduces new store pet habitat designs and improved standards for animal suppliers. Petco is recognized for its animal care commitment and contributions to the pet industry with the APPA’s first Gold Standards Award. The company also adds dog training classes to all stores.
2005 - Petco celebrates its 40-year anniversary and opens its first store in Alaska, the company’s 49th state.
2006 - Petco grows to 800 stores in 49 states and more than 18,000 associates nationwide. The company is taken private again by private equity investment groups led by TPG.
2008 - The first Petco store opens in Hawaii expanding Petco’s “paw print” into all 50 United States.
2009 - The Petco Foundation celebrates its tenth anniversary, surpasses $50 million donated to animal welfare partners across the U.S. Petco introduces Unleashed by Petco, a small format store with a limited, high-end assortment and friendly neighborhood feel. With the rollout of the Natural Shop and the largest assortment of natural foods, Petco solidifies its’ position as a leader in natural nutrition. Company store count tops 1,000.
2010 - Petco and the Petco Foundation partner to launch the first National Pet Food Bank, designed to help financially struggling families keep their pets. The company becomes a founding sponsor of HABRI, the Human Animal Bond Research Initiative, which fosters research on the benefits of having pets in people’s lives. Petco also introduces a new Vision: Healthier Pets. Happier People. Better World.
2011 - The updated tagline, “Where the healthy pets go” is introduced and the company opens an additional corporate office in San Antonio (San Antonio Support Center) to work in concert with its National Support Center in San Diego. Petco also enters the dog daycare and boarding market by acquiring Pooch Hotels.
2012 - Petco opens its first store in Puerto Rico in December. The Petco Foundation surpasses and celebrates $100 million raised for animals in need.
2013 - Petco introduces WholePets, a commitment to help pet parents care for pets’ physical, mental, social and emotional needs. The company also opens its first Petco stores in Mexico, with one in Mexico City and one in Guadalajara.
2014 – Petco announces plans to open a new San Diego Support Center in the Rancho Bernardo community of San Diego, which will consolidate multiple offices and hundreds of corporate partners under one roof. Petco Park celebrates its 10th Anniversary and the Petco Foundation donates $10,000 to the San Diego Humane Society in honor of the 10-year partnership and shared commitment to animal welfare in Petco’s hometown. Petco also becomes the first national pet specialty retailer to announce it will no longer carry any dog or cat food and treats made in China.
Today, Petco employs more than 25,000 partners and operates more than 1,300 Petco locations across the U.S., Mexico and Puerto Rico, including more than 100 Unleashed by Petco locations, 10 Pooch Hotel destinations, and petco.com.
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