Post Featured Image
Post Featured Image

Petco Animal Supplies sold in $4.6 billion deal

Last Updated:

Share:

Petco announced yesterday that it will be acquired for $4.6 billion by CVC Capital Partners (Luxembourg) and Canada Pension Plan Investment Board.  The deal should close in early 2016.  With its headquarters in San Diego, Petco had been taken private in 2006 in a $1.8 billion buyout by California-based private equity firms.

James M. Myers, the CEO of Petco, explains that the new ownership will give Petco access to "deep retail experience and resources" to support growth initiatives.

This acquisition forms part of a broader shake-up at the top tier of the U.S. pet industry, which posted relatively slow growth in 2014, particularly in the core retail pet food category.  On the retail side, PetSmart went private in December 2014 with an $8.7 billion sale to a group led by BC Partners.   In 2015, mergers discussions between Petco and rival pet superstore PetSmart stalled because of antitrust risk concerns. In August 2015, Petco filed a Form S-1 with the U.S. Securities and Exchange Commission to position itself for a public offering.  On the manufacturing side, Big Heart Pet Brands (formerly Del Monte Foods' pet assets) was acquired in February 2015 by J.M. Smucker Company for $5.8 billion.

As pet superstore competitors, Petco and PetSmart have followed somewhat similar paths, "emphasizing pets as family, higher-margin products and services, long-term relationships with customers, and pet adoption and welfare," as Packaged Facts senior pet analyst David Lummis observes in the current issue of Pet Product News (November 2015).  In differentiation itself from PetSmart, Petco has positioned itself more directly on premium pet health and wellness, as reflected in Petco's mission statement "Healthier Pets. Happier People. Better World."

Of the approximately 65 million pet-owning households in the U.S., PetSmart draws about 20 million as shoppers, compared with 15 million for Petco.  Between them, these two pet superstore chains account $10 billion of the $45 billion U.S. retail market for pet products.

Packaged Facts research director David Sprinkle notes that this acquisition is "not necessarily just about competition in the U.S."   Petco, in its press release about the ownership change, refers to continued growth in the "North American pet industry"—raising questions about Petco's ambitions for the Canadian pet market. Petco currently operates retail locations in Mexico (as well as Puerto Rico), but not in Canada.  Even so, as reported in Packaged Facts' Canadian Pet Food Market (May 2015), Petco makes the list of top retailers to Canadian pet owners due to extensive cross-border shopping by Canadians who live close to the U.S.  And though a tenth of the scale of the U.S. market, reflecting relative population size, the Canadian pet market is posting more robust growth.

In addition, Petco's strength as an Internet retailer through Petco.com (and also through the acquired Drs. Foster & Smith) provides a well-established ecommerce platform for potential international growth.

Comments (0)

Join the newsletter and never miss out on cat content again!

"*" indicates required fields

Consent*
This field is for validation purposes and should be left unchanged.

By clicking the arrow, you agree to our web Terms of Use and Privacy & Cookie Policy. Easy unsubscribe links are provided in every email.