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KKR, CD&R prepare joint bid for PetSmart

November 19
7:42 AM 2014

Buyout firms KKR & Co LP (KKR.N) and Clayton, Dubilier & Rice LLC (CD&R) have teamed up to take PetSmart Inc (PETM.O) private for more than $7.5 billion, people familiar with the matter said on Tuesday, as the auction for the pet food retailer heats up.

KKR and CD&R are planning to submit a joint bid for PetSmart next month, the people said. Apollo Global Management LLC (APO.N) and BC Partners Ltd are also separately considering offers, the people added.

PetSmart shares traded up 2.2 percent on the news at $75.25 in after-hours trading in New York.

A deal for PetSmart would represent the biggest leveraged buyout of the year. KKR's and CD&R's collaboration underscores the big size of the equity check involved in the deal. Buyout firms have also been reaching out to fund investors asking them to co-invest in the deal alongside the funds, the people said.

The latest development comes as activist investor Jana Partners LLC, which has a 9.8 percent stake in PetSmart, considers nominating its own slate of directors to the company's board if it is not satisfied with the outcome of the auction, the people said.

The sources asked not to be identified because the talks are confidential. PetSmart and KKR did not respond to requests for comment, while Jana, CD&R, Apollo and BC Partners declined to comment.

Petsmart said in August it would explore a potential sale of the company amid pressure from Jana and other investors, including Longview Asset Management Ltd, which holds a 9 percent stake. The board is working with JPMorgan Chase & Co (JPM.N) on the auction.

Phoenix-based PetSmart, founded in 1986, has about 54,000 employees and operates 1,387 pet stores, according to its website.

The company has faced mounting investor pressure at a time when fierce competition from large retailers including Wal-Mart Stores Inc (WMT.N) and Amazon (AMZN.O) is squeezing specialty stores.

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