Forum Home Page [see Broadridge note belo


The Shareholder Forumtm

support for appraised intrinsic value realization

of stock investments in

PetSmart, Inc.



AVR Status

PetSmart reported voting approval on March 6, 2015 by 74.4% of outstanding shares for the company's definitive agreement to be acquired by a consortium led by BC Partners, with the participation of existing shareholder Longview Asset Management, at a price of $83.00 per share, as presented in the company's February 2, 2015 Definitive Proxy Statement, and the merger became effective on March 11, 2015. Based on its review of suitability, the Forum will offer support of shareholders who reserved rights to consider appraisal for realization of the company's intrinsic value.


Forum reference:

Market conditions for private equity buyout opportunities to realize intrinsic value


Source: Financial Times, December 23, 2014 article > companies >



December 23, 2014 1:03 pm
Private equity hopes Petsmart marks a turn

Henny Sender in New York



BC Partners’ $8.7bn buyout of Petsmart last week was not just this year’s largest private equity transaction. Private equity executives say it could also signal the beginning of a period of heightened activity for buyout firms that have been sitting on the sidelines as deals swirled around them.

Most of this year’s acquisitions have been driven by public companies whose high share prices allowed them to outbid private equity buyers, and boost their overall profit margins through cost cutting. In the past, such waves of dealmaking by “strategic” corporate buyers were quickly followed by waves of mergers and acquisitions involving financial investors. This time, by contrast, there has been a long delay.

Buyout groups spent just $180bn on US and European deals between January 1 and September 30 this year, according to Dealogic – a figure that has been in effect flat since 2009. At the peak of the mergers and acquisitions market in 2006, they had accounted for $590bn-worth of deals, and then another $570bn in 2007.

One reason for the depressed level of buyouts this year has been the rapid appreciation of share prices, which makes it hard for buyout firms and their targets to agree on valuations. “They couldn’t make the numbers work,” says Mark Bradley, a former Morgan Stanley banker who founded boutique adviser DBO Partners in San Francisco. “As the private equity firms were working on deals, they kept getting more expensive.”

Now, however, the head of capital markets at one New York private equity house claims: “Conditions for the long delayed uptick in [leveraged buyouts] are finally in place.” His belief in a recovery in deals is based on a US equity market that appears “less crazy”.

“Now, the market increase is in line with earnings while, last year, the market raced ahead of earnings,” the person explains. “A stock market that is no longer so hot, and companies that are good candidates for buyouts like Petsmart, are a perfect combination.”

Petsmart had operating issues that attracted unwanted attention from activist hedge funds, making its board more receptive to a sale. But it also had strong cash flows, making it an appealing target for the private equity firms that seek to pile debt on the companies they buy.

Indeed, the dynamics of the Petsmart buyout are reminiscent of the deals private equity was doing at the height of the boom, taking public companies private. In the peak year of 2006, Dealogic recorded $311bn of such deals, accounting for 13 per cent of all M&A. By contrast, between January and September this year, the value of such “take-privates” was less than $20bn – or 1 per cent of all dealmaking.

Buyout firms were far more active this year in selling companies, as they sought to take advantage of ebullient US equity prices. This allowed the private equity industry to return a record $516bn to investors on an annualised basis this year, according to Hamilton Lane research, while only asking investors for $306bn of new money for deals.

Part of the problem private equity faces in putting investors’ money to work is that the competitive landscape has become more intense, even as investment opportunities have become harder to find. Pension funds such as Canadian Pension Plan Investment Board and sovereign wealth funds have gone from being passive investors to private equity rivals.

If the $9bn Petsmart deal is a turning point, it is still small compared with the industry norm of just a few years ago – and larger buyouts are now being constrained by how much debt regulators will tolerate. Limits on the use of debt in any private equity buyout may explain why neither JPMorgan nor Bank of America took part in the financing for any of the Petsmart bidders, leaving Citigroup as the only heavily regulated US bank participating, along with Jefferies, which does not take deposits, and foreign banks Nomura, Deutsche Bank and Barclays.

Many private equity groups also learnt in the last boom that overpaying for companies is a critical error. This year, they have seen Energy Future Holdings – the biggest-leveraged buyout in history – file for bankruptcy protection, and watched as companies that were the object of frenzied auctions, such as Freescale Semiconductor, continue to languish below their purchase prices.


© The Financial Times Ltd 2014




The project supporting investor interests in PetSmart, Inc. is being conducted by the Shareholder Forum for the benefit of Participants that have reserved Appraised Value Rights ("AVR") Managment, subject to conditions including standard Forum policies that each Participant is expected to make independent use of information obtained through the Forum and that participation is considered private unless the Participant specifically authorizes identification.

Inquiries may be sent to

The information provided to Forum participants is intended for their private reference, and permission has not been granted for the republishing of any copyrighted material. The material presented on this web site is the responsibility of Gary Lutin, as chairman of the Shareholder Forum.

Shareholder Forum™ is a trademark owned by The Shareholder Forum, Inc., for the programs conducted since 1999 to support investor access to decision-making information. It should be noted that we have no responsibility for the services that Broadridge Financial Solutions, Inc., introduced for review in the Forum's 2010 "E-Meetings" program and has since been offering with the “Shareholder Forum” name, and we have asked Broadridge to use a different name that does not suggest our support or endorsement.