The $8.7 billion buyout of Phoenix-based PetSmart Inc. is almost done deal after shareholders cast their votes in favor of the move on Friday afternoon.
In a statement, the pet-products retailer said the deal is expected to close on Wednesday and stockholders will cash out their stakes at $83 per share.
The takeover is the result of a multi-billion dollar hedge fund, Jana Partners, amassing a nearly 10 percent stake in PetSmart last summer. Jana Partners pressured the company to sell itself and go private, saying PetSmart was undervalued and not keeping up with industry competition.
PetSmart initially resisted, but then reached a buyout deal in December with a consortium led by private equity firm BC Partners.
But once the deal closes next week, the real work begins.
Robert Mittelstaedt, the retired dean of Arizona State University’s W.P. Carey School of Business, said the company will undergo restructuring to make room for improvement and growth.
That may involve some layoffs and stores closing, but he said the situation could’ve been more drastic if PetSmart merged with another company.
“If you merge two companies, then you can say, ‘Gee, we don’t need two CEOs, we don’t need two presidents, we don’t need two chief financial officers. We just need one,” Mittelstaedt said. “You’d probably lose more jobs if you were merging two companies in the same business than you do when it’s just acquired by somebody else. It’s just a different owner now.”
The upside is the company’s headquarters will probably stay in Phoenix and its online presence, which has lagged competition, will likely be a focus for improvement.
Ultimately, he said this could be a good thing for shoppers.
“(BC Partners) wouldn’t be buying it for a price that’s above what it’s ever traded at if they didn’t think they could improve its performance even further,” Mittelstaedt said. “So they’re going to be out there trying to make consumers even more interested in coming to their stores than they have in the past.”
But in these cases, companies often don’t stay private indefinitely.
Mittelstaedt said PetSmart’s new owner will eventually want a return on its investment, so it’ll cash out if it successfully takes the company public again, which could happen in as little as two or three years.
