In a sign that club deals are not yet over, and private equity's appetite for large retailers in select situations still exists, PetSmart Inc. (PETM) has agreed to be acquired by a consortium led by BC Partners Inc. for $83 per share in cash, valuing the retailer at about $8.7 billion, it said on Sunday.
A source familiar with the situation said that while the largest leveraged buyout this year appears to be a satisfactory transaction, the possibility remains that Petco Animal Supplies Inc. and its PE backers Leonard Green & Partners LP and TPG could make a rival offer based on BC Partners' due diligence and winning bid.
Leonard Green and TPG were not allowed to participate in the auction process because of competition concerns. A number of PE firms were said to be circling the retailer at various points, including KKR & Co. LP and Clayton, Dubilier & Rice LLC as well as Apollo Global Management LLC, sources had said.
Meanwhile, the $83 per share deal would give the Phoenix-based pet retail giant a market cap of about $8.25 billion, with approximately 99.4 million shares outstanding according to filings with the Securities and Exchange Commission.
And with cash and cash equivalents of roughly $170 million, no long-term debt and long-term capital lease obligations of about $520 million, the enterprise value equates to approximately $8.6 billion.
That works out to be a multiple of about 9.2 times the almost $930 million in Ebitda PetSmart generated for the fiscal year ended Feb. 2, a multiple of roughly 9.1 times the close to $940 million the retailer generated for the last 12 months ended Nov. 2, the company said, and nearly 9 times the approximately $960 million in Ebitda the company is projected to generate for the fiscal year ending on Jan. 31, according to data provided by Bloomberg.