Phoenix-based PetSmart Inc.’s quarterly earnings released this week show relatively flat performance, with revenue up by a modest 2.6 percent year-over-year and profits declined for the fourth consecutive quarter.
But the mediocre earnings release was overshadowed by more speculation that PetSmart could agree to a takeover before the end of the year.
PetSmart, a fiscally conservative, $7 billion company with hardly any debt, has been struggling to keep up with increased competition within the growing pet-products industry.
This summer, it became the target of a multi-billion dollar hedge fund and activist investor Jana Partners, which became PetSmart’s largest shareholder by acquiring nearly 10 percent of the retailer’s stock earlier this year.
Facing pressure from Jana, PetSmart announced in August that it would consider putting itself up for sale, and then laid off more than 170 employees at its Phoenix headquarters the next month as part of its cost-cutting efforts.
As the quarterly earnings were being released this week, a Reuters article cited anonymous sources saying private equity firms KKR & Co. LP and Clayton, Dubilier & Rice LLC are getting ready to make a $7.5 billion-joint bid to buy PetSmart and take it private.
KKR and Clayton, Dubilier & Rice LLC are purportedly among several interested buyers.
Bids are due by early next month, and PetSmart could pick a winner by year-end, according to the Wall Street Journal.
If the deal goes through, it would be the largest leveraged buyout of the year.
