Caisse de Depot et Placement du Quebec, the entity that manages Quebec’s public pension plans, is part of the consortium of investors that agreed to buy PetSmart over the weekend.
Details from the New York Times:
PetSmart agreed on Sunday to sell itself to a group led by the investment firm BC Partners for about $8.7 billion, months after the retailer came under pressure from two hedge funds.
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PetSmart has long been seen as a good target for private equity firms, given its relatively strong cash flow and low debt. In a leveraged buyout, private equity firms generally finance the majority of the purchase price with borrowed money.
PetSmart operates more than 1,300 pet stores in the United States, Canada and Puerto Rico.
“The question is, ‘Why haven’t there been more people interested in PetSmart?’” said Raymond Svider, a managing partner of BC Partners. “The category of pet products has been growing in the U.S. and abroad consistently for a number of years.”
The retailer disclosed in August that it was exploring a sale after Jana Partners, the big activist investor, emerged as a major shareholder. The pet supply company had already been weighing its strategic options as its sales had begun to slow.
By that time, Jana and another firm, Longview Asset Management, had begun agitating for a sale of the company. Jana now has a stake of 9.75 percent.
The monthslong auction of PetSmart eventually drew the interest of some of the biggest private equity firms, including Apollo Global Management, Kohlberg Kravis Roberts and Clayton Dubilier & Rice.
Ultimately, BC Partners, a European-American firm with about $15 billion under management, and some of its own investors emerged as the winner. (Longview, which owns a stake of roughly 9 percent in PetSmart, will roll over about a third of its holdings into the newly private retailer, cashing out the rest of its shares.)
Under the deal’s terms, the consortium will pay about $83 a share in cash, about 6.8 percent higher than PetSmart’s closing price on Friday and about 39 percent higher than the closing price on July 2, the day before Jana emerged as a shareholder.
Caisse de Depot et Placement du Quebec manages $214 billion in assets.
Photo by Mike Mozart via Flickr CC License