PetSmart’s leading shareholder Longview Asset Management has been mounting pressure on the retailer to consider a potential sale or other strategic alternatives.
The investment firm, which owns about 9% stake in PetSmart, noted that the retailer will be better valued by private investors than by the public.
Also, PetSmart’s relatively low debt makes it an ideal investment opportunity for private equity buyers.
Longview founder James Star in an open letter to the PetSmart wrote, "The record of successful private equity acquisitions of pet companies, together with currently highly accommodative debt markets, supports a high valuation relative to the current stock price."
"We are concerned that fending off a prolonged activist campaign will distract company employees at all levels from their primary task of selling goods and services to Petsmart’s customers and erode business value."
Other activist investor Jana Partners, which acquired 9.9% stake in PetSmart recently, also noted that conditions are right for a buyout.
In recent quarter, PetSmart’s witnessed low sales due to the intense competition with online retailers like Amazon and Wag.com.
PetSmart is a retail chain operating in the US, Canada, and Puerto Rico engaged in the sale of specialty pet supplies and services such as grooming and dog training, cat and dog boarding facilities, and daycare.
It also offers a varied selection of animals for sale and adoption such as birds, fish, amphibians, reptiles, and several breeds of small animals like guinea pigs, chinchillas, gerbils, hamsters, and mice.