The private equity firm CVC plans to carry out a joint deal operation with partners CPPIB to acquire Petco for an estimated 4.7 billion dollars, which is inclusive of the estimated debt. The Canada Pension Plan Investment Board has worked on a tentative plan along with transaction partners CVC to negotiate a healthy buy out of Petco. In the latest progression of the deal, it is understood that the CVC and CPPIB partnership seems to outbid most of its competitors to succeed at the deal.
The Reasons Behind the Deal Secrecy
The negotiations and bidding of the deal has been kept under stringent lock and key measures to ensure that there aren’t any leaks to the public or the press. The spokesmen of both companies have assured that they would publish statements once the deal is complete. Most of the officials involved in the deal do not wish to make details public as it is still a nascent stage in the negotiations, and may fizzle out if things do not work. Even though most parts of the deal were kept secret, the CPPIB spokesperson did comment on the difficulty of the kind of deals such as this in the current market condition. Many experts agree, that under the current market circumstances, with near inflation rate target achieved, it has been difficult for many private equity firms to run profitable businesses.
The Previous Bidder
He also went on to delineate that the debt induced markets have made acquisitions extremely difficult to undergo. The situation and market was described as choppy for the deal and could be successful, but could simultaneously fizzle out. Petco also published the fact that they were in negotiations with PetSmart a while ago, but negotiations broke down as a few antitrust regulations broke down.
The situation that ensued the PetSmart deal is what is feared as a potential possibility this time around with the potential deal as well. PetSmart was taken private earlier this year by a buyout consortium led by BC Partners Ltd for $8.7 billion, including debt.
The U.S. pet industry, which includes food, supplies, veterinary services, and non-medical services, amounted to an estimated $74 billion market in 2014 and is expected to grow to $92 billion in the year 2019.The San Diego based, Petco operates in over 1,400 stores in 50 U.S. states across America. It had approximately $4 billion in sales in the 12 months to Jan. 31.