This site uses cookies to enhance your reading experience. By using this site, you consent to our use of cookies.Okay
Skip to content
Axios
  • Newsletters
    Sign up for Axios AMAll newsletters
  • Sections
    Top StoriesTechnologyPoliticsBusinessHealth CareScienceAutonomous VehiclesFutureEnergyWorld
  • Special Features
    Smarter FasterFacts MatterAxios VisualsPro Rata PodcastAxios on HBO
  • More
    NewslettersEventsAboutContact NewsroomPrivacy & TermsAdvertise With Us
  • profile
  • Search
Pro Rata
  • Tue, Feb 19
  • Fri, Feb 15
  • Thu, Feb 14
  • Wed, Feb 13
  • Tue, Feb 12
  • Mon, Feb 11
  • Fri, Feb 8
  • + More Issues
By Dan Primack

Early delivery this morning, due to my inability to properly plan travel...

The BFD: PetSmart buying Chewy

PetSmart, a pet supplies retailer owned by BC Partners, has agreed to acquire pet-focused e-commerce company Chewy for around $3.35 billion (as first reported by Recode). We're leading with this one today, because there's a lot to break down:

  1. League tables: This is the largest sale ever of a VC-backed e-commerce company, topping Walmart's $3 billion purchase of Jet.com.
  2. Money matters: The deal is being financed by new equity from PetSmart's sponsors, which includes both BC and groups like GIC, Longview Asset Management, Caisse de dépôt et placement du Québec and StepStone Group. Plus a new debt offering from existing PetSmart lenders Barclays and Citi.
  3. Breakdown: No announcement on the financial breakdown, but I hear that the deal includes around $2 billion in cash, while the remainder is stock and/or retention packages.
  4. Bank tellers: One reason it's so silly for PetSmart to be playing coy on the financing details is that most of it will come out when the banks go out to syndicate the new debt. Until then, what we know is that PetSmart de-levered a bit from its original 2014 buyout, from 6.4x EBITDA down to 5.6X after a dividend recap in early 2016.
  5. Sales pitch: If we all read the Miami Herald more often, we might have sensed that something was up.
  6. PetSmart's strategy: The legacy retailer and Petco are dominant in the pet supplies market, but are dwarfed by Chewy when it comes to e-commerce. And since e-commerce is where pet food sales are heading ― no matter the bricks-and-mortar perks of on-site vet and grooming services ― this is a logical play. Even at PetSmart, physical retail is having some issues. LevFin Insights reports that the company had a 4.6% drop in same-store sales in Q4, although EBITDA grew by 2%.
  7. Speaking of Petco: For years there has been talk that PetSmart and Petco may merge, but that there were anti-trust concerns. This deal makes that tie-up even less likely.
  8. Chewy's strategy: This will help with distribution. And it's a massive check for a pair of Floridian founders, plus early investors like Boston's Volition Capital. But all signs were that this company could go public (perhaps after one more big, pre-IPO round), and now it's tied its horses to a physical retailer owned by a private equity firm known for its cost-cutting capabilities. Culture, meet shock. Understandable decision, but a highly unusual one.
Share on FacebookShare on TwitterShare on LinkedIn

Top of the Morning

Share on FacebookShare on TwitterShare on LinkedIn

Venture Capital Deals

Share on FacebookShare on TwitterShare on LinkedIn

Private Equity Deals

Share on FacebookShare on TwitterShare on LinkedIn

Public Offerings

Share on FacebookShare on TwitterShare on LinkedIn

Liquidity Events

Share on FacebookShare on TwitterShare on LinkedIn

More M&A

Share on FacebookShare on TwitterShare on LinkedIn

Fundraising

Share on FacebookShare on TwitterShare on LinkedIn

It's Personnel

Share on FacebookShare on TwitterShare on LinkedIn

Final Numbers

Share on FacebookShare on TwitterShare on LinkedIn
  • Tue, Feb 19
  • Fri, Feb 15
  • Thu, Feb 14
  • Wed, Feb 13
  • Tue, Feb 12
  • Mon, Feb 11
  • Fri, Feb 8
  • + More Issues