Petco weighs IPO, sale to PE and PetSmart merger

Petco Holdings Inc., which is owned by TPG and Leonard Green & Partners, is considering all of its options as it searches for a buyer.

Books for the Petco auction have gone out, three sources said. The sale has attracted the attention of several private equity firms. Those firms who may bid include: Bain Capital LLC, Apollo Global Management LLC, Hellman & Friedman LLC, Ontario Teachers’ Pension Plan, Canada Pension Plan Investment Board, Carlyle Group and Ares Management LP, sources said.

San Diego-based Petco, a pet supplies retailer, is seeking bids of around $3 billion, sources said.

Petco has begun merger talks with PetSmart, Reuters reported Friday. Last year, PetSmart ruled out a merger with Petco because it didn’t think such a deal would receive antitrust clearance. PetSmart also didn’t want to disclose confidential information to its biggest competitor, Reuters said. Instead, PetSmart opted for a sale to BC Partners Ltd for $8.7 billion.

Petco, in August, also filed to go public. TPG owns nearly 47 percent of the Petco, Leonard Green has 37.5 percent and the Abu Dhabi Investment Authority has nearly 12 percent, the SEC filing saidGoldman Sachs & Co., BofA Merrill Lynch and JPMorgan Chase & Co. are bookrunners on the IPO, the filing said.

When asked which of the three — IPO, merger with PetSmart or sale to a PE firm – Petco would choose, one banker said: “I’m going with another PE firm. Mergers are hard, the IPO market is weak and PE needs deals.”

Petco went public for the first time in 1994. TPG and Leonard Green & Partners acquired it for $600 million in 2000. Petco launched a second IPO in 2002. TPG and Leonard Green then re-acquired the company four years later for $1.8 billion.

Executives for Petco, Leonard Green, TPG, Bain, Goldman, Apollo, Hellman & Friedman and OTPP declined comment. Ares and Carlyle did not return requests for comment.

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