| NEW YORK, July 22
NEW YORK, July 22 PetSmart Inc has
hired investment bank JPMorgan Chase & Co to evaluate a
range of alternatives, including a leveraged share buyback and a
potential deal with private equity, according to people familiar
with the matter.
PetSmart's hiring of JPMorgan in recent weeks comes as
investor pressure mounts on the pet supply store chain to sell
itself, at a time when fierce competition from large retailers
including Wal-Mart and Amazon squeezes
Activist investment firm Jana Partners LLC, as well as
Longview Asset Management, which together own a stake of close
to 20 percent in PetSmart, have urged the nearly $7 billion
company to pursue a sale.
Buyout firms have long been interested in the prospect of
taking PetSmart private and the latest pressure from large
shareholders have prompted several to explore a leveraged
buyout, people familiar with the matter said, asking not to be
named because the matter is not private.
PetSmart's evaluation of strategic alternatives is in the
very early stages, and the company is currently more inclined to
pursue a leveraged buyback - taking on debt to conduct a big
share repurchase program, than other deal options, the people
PetSmart is expected by analysts to generate $930 million of
earnings before interest, tax, depreciation and amortization
this year, and its nearly debt-free balance sheet also can
withstand some borrowing.
Representatives for PetSmart and JPMorgan declined to
Jana, run by Barry Rosenstein, often pressures companies it
invests in to change strategies or sell themselves. It disclosed
a stake in grocery chain Safeway Inc in September and
asked it to explore strategic alternatives.
Safeway eventually agreed to be acquired by private equity
firm Cerberus Capital Management in a deal valued at about $9.4
billion in March.
In response to shareholder pressure, PetSmart said on July 7
that it is reviewing potential changes in its capital structure,
with a focus on returning capital to shareholders.
The Phoenix, Arizona-based retailer, founded in 1986, has
about 53,000 employees, operates more than 1,340 pet stores, as
well as 200 in-store dog and cat boarding facilities, according
to its website.
(Reporting by Olivia Oran and Soyoung Kim in New York; Editing
by Bernard Orr)