Credit: Shutterstock photoPetco Holdings Inc., filed preliminary documents with the U.S. Securities and Exchange Commission on Monday to launch an initial public offering, which will mark the third time the company will go public in the last three decades.
According to its filings, Petco plans to raise $100 million, though that figure is likely just a placeholder to calculate filing fees, and is likely to change. Other details of the offering, including the number of shares to be offered, the price by which they will be offered, and on which market Petco will list on, were not contained in the documents and are yet to be known.
Petco will aim for a market value of approximately $4 billion, though according to the retailer, the figure could change on investor feedback and market conditions. Underwriters for the deal include Goldman Sachs (GS) , Bank of America's (BAC) Merrill Lynch, JPMorgan (JPM) , Credit Suisse (CS) , Deutsche Bank (DB) , Morgan Stanley (MS) , and Wells Fargo (WFC) .
The filing comes just months after Petco's competitive rival, PetSmart Inc., was taken private by a group led by private equity firm BC Partners Ltd. in a deal that was valued at roughly $8.25 billion, the largest leveraged buyout in 2014.
Originally founded in 1965 as a mail-order veterinary-supplies business and now headquartered in San Diego, California, Petco is a leading omnichannel specialty retailer of pet food, supplies, services, and companion animals in the United States, with one of the largest selections of premium pet brands and services available to pet-loving consumers. Petco has more than 1,400 locations in the U.S. and Puerto Rico under its namesake brand and Unleashed by Petco, as well as 13 stores that are part of a joint venture in Mexico.
Petco was last taken private in 2006 by private equity firms TPG and Leonard Green & Partners in a $1.7 billion leveraged buyout. Before the IPO, TPG owns 47% of the company's equity, and Leonard Green & Partners has 38%, according to Petco's SEC filings.
The retailer reported net sales of roughly $4 billion in 2014, and net income of $75.3 million, compared to net sales of $3.79 billion and net income of $84.8 million in 2013. In regards to comparable sales, a key metric in the industry that Petco defines as stores open for at least a year along with online sales, the company reported an increase in each of the 21 most recent quarters. Petco stated that it has seen an average increase in comparable sales of 3.5% each year since fiscal 2005.
Pet-supply stores have benefitted in recent years from increased consumer spending on pets, even during the past recession. In its filing, Petco projects that American spending on pets will reach $76.6 billion in 2015, up significantly from $62.7 billion from just a few years ago in 2010. This increase is despite the percentage of U.S. households owning pets remaining relatively constant around 54% over the time span.
Petco will join a list of recent pet-supplier IPO's that includes Blue Buffalo Pet Products (BUFF) and Freshpet (FRPT). Blue Buffalo enjoyed a successful IPO in late July , raising $677 million with the offering, and seeing a stock price jump of 36% on its first day of trade. Freshpet (FRPT), maker and seller of refrigerated foods and treats for cats and dogs, launched its IPO in November 2014, and saw a first day jump of 27.4%.
Bottom Line
The pet-supplies industry seems to be enjoying a solid amount of growth at the moment as consumers spend more and more on their companions, and it has created buzz from investors towards the industry's retailers. As consumers continue to benefit from a slowly improving economy that spending could increase even higher, and the industry, as well as Petco, could see even greater growth, and even more investor attention in the near future.
The date for Petco's IPO is unknown, as are much of the details around the offering as mentioned, so be sure to check back for updates as more information becomes known about this deal in the coming months.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
