PetSmart Buyout an $8.7 Billion Deal

PetSmart Inc. (NASDAQ: PETM) announced on Sunday that it has entered into a definitive agreement to be acquired by BC Partners. The pet supply retailer will be acquired for $83.00 per share, which is a premium of 6.5% from Friday’s close. The transaction is expected to close in the first half of 2015.

J.P. Morgan is serving as the financial advisor for PetSmart, while Wachtell, Lipton, Rosen & Katz is serving as the legal advisor.

The buying consortium includes some funds advised by BC Partners, along with a few of its limited partners, such as La Caisse de depot et placement du Quebec and StepStone. Longview Asset Management will participate in the consortium and has committed to vote in favor of the transaction. It owns or manages approximately 9% of PetSmart’s outstanding shares.

It is also worth noting that this announcement follows a review of strategic alternatives by the PetSmart board of directors to maximize shareholder value, which began over the summer. The transaction was unanimously approved by the board. The consortium has received fully committed debt financing in connection with the transaction.

The value of the acquisition is approximately $8.7 billion, which represents a multiple of 9.1 times the company’s EBITDA for the 12 months ended November 2, 2014.

David K. Lenhardt, president and CEO of PetSmart, said:

This transaction is a testament to the strength of the PetSmart brand and franchise and reflects the dedication and commitment of our 54,000 associates to serving our customers and delivering value for our company and our shareholders. The consortium led by BC Partners will be an excellent partner for PetSmart as we continue to implement our strategic plan to capitalize on our opportunities for growth and meet the needs of pet parents.

Shares of PetSmart were up more than 4% to $81.35 in premarket trading, a new high if it holds. The stock has a consensus analyst price target of $74.88 and a 52-week low of $55.00.

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