BC Partners to acquire PetSmart for $8.7bn

The British PE firm fought off stiff competition to complete the largest US private equity buyout of 2014

In the last breaths of 2014 London-based BC Partners has pulled off one of the biggest private equity deals of the year, heading up a consortium in the $8.7 billion acquisition of US pet products retailer PetSmart.

BC Partners, along with several of its limited partners, including La Caisse de dépôt et placement du Québec and StepStone, has offered $83.00 per share to take the company private. This represents a premium of around 39 percent over PetSmart’s closing share price on July 2, 2014. The $8.7 billion transaction value represents a 9.1x multiple on the company’s adjusted EBITDA for the twelve months ending November 2, 2014, according to BC Partners. The firm is investing in the company using its BC European Capital IX, a 2010-vintage €6.68 billion vehicle.

The details of the debt package have not been disclosed, but the transaction has been underwritten by Citigroup, Nomura, Jeffries, Barclays and Deutsche Bank. BC Partners and its consortium were advised by Simpson Thacher & Bartlett and Ernst & Young.

This deal is up there with the biggest private equity buyouts of 2014. Earlier this month the Canadian government approved 3G Capital-backed Burger King Worldwide’s $11 billion acquisition of Canadian coffee and doughnut retailer Tim Hortons. In April Blackstone Group acquired industrial products maker Gates Global for $5.4 billion.

Longview Asset Management, which holds around 9 percent of the company’s shares, has agreed to vote in favour of the transaction. It will roll over a third of its holdings into the company, cashing out the rest of its shares at the same $83.00 per share that the company’s public shareholder will receive.

Longview President and CEO James Star said in a statement that the sale was an “excellent outcome” for shareholders, delivering “significant and immediate value while best positioning the company for the future”, adding that Longview “fully support[s]” the transaction.

Activist hedge fund Jana Partners disclosed in a regulatory filing in July that it had amassed a 9.9 percent stake in PetSmart and, along with Longview, began pushing for a sale. It is understood that Jana is likely to support the sale, although it is unclear whether it will be divesting its shares.

According to media reports the auction also attracted a bid from Apollo Global Management, which on Friday was thought to be the front-runner, and a joint bid from Kohlberg Kravis Roberts and Clayton Dubilier & Rice.

PetSmart employs around 54,000 associates in approximately 1,387 pet stores across the United States, Canada and Puerto Rico, and operates around 201 in-store PetSmart PetsHotel dog and cat boarding facilities. As well as offering pet food and pet products, the company also offers dog training, pet grooming, day care services for dogs and pet adoption services in-store.