Petco acquired by CVC/CPPIB in $4.6bn deal

February 2016 | DEALFRONT | PRIVATE EQUITY & VENTURE CAPITAL

Financier Worldwide Magazine

CVC Capital Partners and Canada Pension Plan Investment Board have announced a definitive agreement to jointly acquire Petco Animal Supplies, Inc. in a deal worth approximately $4.6bn.

The San Diego-based Petco, currently owned by a group of investors led by TPG and Leonard Green & Partners (LGP), is a leading specialty retailer of premium pet food, supplies and services, which operates more than 1400 Petco locations across the US, Mexico and Puerto Rico, as well as one of the leading pet industry e-commerce platforms.

“We are very excited to partner with CVC and CPPIB to further drive our strategic goal of being the trusted partner of choice for pet parents,” said James M. Myers, Petco’s chief executive. “As the North American pet industry continues to grow, Petco is well positioned with a strong brand, differentiated engagement model, and omnichannel strategy. Both CVC and CPPIB have outstanding track records and deep retail experience and resources that will help support our growth initiatives.

“I’d like to thank TPG and LGP for their long-standing partnership. We have grown significantly under their ownership, and built one of the industry’s leading pet specialty retailers (the Petco Foundation has raised more than $125m since it was created in 1999),” he added.

CVC Capital Partners, one of the world’s leading private equity and investment advisory firms, has a network of 24 offices and over 300 employees throughout the US, Europe and Asia. To date, CVC has secured commitments of over $79bn in funds from a diverse and loyal investor base, completing over 300 investments in a wide range of industries and countries across the globe, with an aggregate transaction value of over $120bn.

“Petco is clearly a leader in the industry, with strong further growth potential and a talented leadership team,” said CVC managing partner Chris Stadler. “The pet category is a growing and dynamic space within which we believe Petco is ideally positioned to further enhance its leadership position. We look forward to working with our outstanding partners at CPPIB to support the company’s growth as it continues to execute its strategy and plans to capitalise on promising market opportunities.”

Fellow acquirer CPPIB, a professional investment management organisation that invests the funds not needed by the Canada Pension Plan (CPP) to pay current benefits on behalf of 18 million contributors and beneficiaries, invests in public equities, private equities, real estate, infrastructure and fixed income instruments. Headquartered in Toronto, CPPIB is governed and managed independently of the CPP (and at arm’s length from governments) and has offices in Hong Kong, London, Luxembourg, Mumbai, New York City and São Paulo.

“This investment aligns well with CPPIB’s strategy to invest in leading retail businesses with strong omnichannel capabilities,” said Shane Feeney, managing director and head of Direct Private Equity at CPPIB. “Petco has a well-known brand and a strong position in the US pet sector. The company has long-term relationships with leading pet food vendors and a significant presence in the fast growing e-commerce channel. We look forward to working alongside one of our long-standing partners, CVC, to leverage our collective retail expertise in helping to build further value in the business.”

Acting as financial advisers to Petco are Goldman, Sachs & Co. and J.P. Morgan Securities LLC. Ropes & Gray are legal counsel. For CVC and CPPIB, Barclays, Citigroup and Moelis are acting as lead financial advisers. Barclays, Citigroup, Royal Bank of Canada, Credit Suisse, Nomura and Macquarie are providing committed debt financing to CVC and CPPIB whilst Gibson Dunn are legal counsel. CPPIB is also being separately advised by Torys LLP.

Subject to customary closing conditions, the CVC/CPPIB/Petco transaction is expected to close in the early months of 2016.

Fraser Tennant