NEW YORK (The Deal) -- In the latest of what's become a slew of pet retail-related transactions, Pet Supermarket founder Charles "Chuck" West on Thursday sold the purveyor of premium pet foods to Atlanta private equity firm Roark Capital Group for a valuation that sources expect to be as high as $480 million.
While financial terms of the transaction weren't disclosed, the privately owned specialty retailer of pet products in the Southeast generates north of $300 million in sales, according to Thursday's announcement.
Pet Supermarket, founded in 1973 by West as Pet Circus, became Pet Supermarket in 1986. The Sunrise, Fla.-based retailer runs 155 specialty pet stores that offer holistic pet food and supplies, as well as vaccinations for dogs, cats and various small animals, including hamsters and tropical fish.
The sale process for Pet Supermarket was robust and included only private-equity firms, according to one source who asked to remain unnamed. Pet Supermarket declined to engage with strategic buyer, Phoenix-based PetSmart, that source said. Another unnamed source indicated that the sale process got underway late last year.
Pet Supermarket likely generates between about $25 million and $40 million in annual EBITDA, and the deal was likely valued at upwards of 10 and 12 times EBITDA, according to these unnamed sources.
On the high end, that would put a potential price tag at about $480 million, or $250 million on the low.
While its unit economics were compelling, the timing for a sale was logical because Pet Supermarket didn't necessarily possess the infrastructure required to take it to the next level, one of the sources said.
A valuation in the range of 10 to 12 times, while on the high end when compared with recent deals in the pet industry, was fair given Pet Supermarket's already strong market share and the significant room it has to grow, the second source added.
It's been a busy six months in the pet retail space.
Petco Animal Supplies, backed by Leonard Green & Partners and TPG Capital, agreed on Nov. 19 to buy Foster and Smith, which, a source previously told The Deal, generates about $250 million in annual revenue.
When a BC Partners-led consortium bought PetSmart for $8.7 billion on Dec. 14, it paid about 9.1 times the target's EBITDA, though that was more of a turnaround story. At its current large size, PetSmart doesn't have as much room to grow.