Why BC Partners brought Apollo into the PetSmart fold; plus new add-on deals

Good morning, Hubsters!

It’s Rafael Canton filling in for Chris Witkowsky for the Wednesday edition of the Wire.

This morning, we’ll take a look at a Deep Dive into PetSmart and see how it’s grown since BC Partners took it private in 2015 and what lies ahead for the pet retailer now that Apollo has become a minority stakeholder. I spoke with folks from BC and Apollo to get the story.

In addition to that, we have deal news from this morning, including Align Capital Partners-backed Marco Rubber & Plastics is acquiring its fifth add-on.

We also have a look at a recent deal from yesterday by ABC Technologies, an Apollo- and Oaktree Capital Management-backed maker of plastics in the auto industry.

Finally, we have a new private equity firm, Kava Equity Partners, which was formed by the Southern Ute Indian Tribe Growth Fund.

Minority sale
In this current climate, PE firms are still trying to figure out exit strategies. With bid/ask negotiations unable to find equilibrium, firms are looking for alternative strategies.

I wrote for PE Hub about PE firm BC Partners bringing in Apollo Global Management as a strategic minority investor for pet retail chain PetSmart.

BC first acquired pet retail chain PetSmart in 2015 for $8.7 billion. Though the firm has been able to recover from a slow start and grow the business over the years, it’s still searching for a buyer or a potential IPO.

“The exit environment in both Europe and the US continues to be very anemic,” Alexis Maskell, partner and head of investor relations at BC told me. “Volumes are down almost 50 percent and, in some cases, more than 50 percent. Deals that are getting done typically involve either a strategic who can take a longer-term view or some form of existing firepower or continuation vehicle to facilitate a transaction or minority sale.”

Rather than make a bad deal, BC brought in Apollo, which has a lot of experience in the consumer/retail sector and can potentially add some new ideas to PetSmart.

“PetSmart operates in an industry that historically has grown every year since 2000 and is two-times the rate of GDP during multiple recessions,” Apollo partner Andrew Jhawar told me. “They should continue to take their share of that expanding market with successful execution of the base plan and see opportunities on top of that still – whether it’s investing behind omni-channel offerings, expanding services, exploring small format stores and expanding the private brand offerings.”

But still, a potential exit looms for BC, and it will be interesting to see what the firms do with PetSmart in the future.

Custom cleanings
This morning, Align Capital Partners-backed Marco Rubber & Plastics announced it is acquiring its fifth add-on, American Seal & Packing, a distributor of specialty O-rings, seals, gaskets and vee packing and based in Santa Ana, California.

Marco Rubber & Plastics is a custom sealing solutions provider and was originally acquired in February of 2020 by ACP.

A deal as easy as 1-2-3
Apollo- and Oaktree Capital Management-backed ABC Technologies agreed to acquire Plastikon Automotive, an auto interiors, assemblies and electric vehicle battery housing supplier from Hayward, California-based Plastikon Industries for $130 million.

The deal represents “a significant step forward for our company,” said Terry Campbell, president and CEO, ABC Technologies, in a statement. “It amplifies our position as an industry leader in lightweighting and plastic injection molding, gives ABC a stronger foothold in the EV space, and most importantly, provides a new set of employees with opportunities to play larger roles in molding the future of mobility.”

Kava Equity Partners
The Southern Ute Indian Tribe Growth Fund announced this morning that it has formed a new investment firm named Kava Equity Partners. The firm has hired Peter Shepard as assistant operating director and James Dudley as managing director.

Kava is seeking majority and minority, private equity investments in lower middle market companies that see business value in partnering with the Southern Ute Indian Tribe and are aligned with the Tribe’s cultural, environmental, and economic values.

“We are excited to see the investment opportunities generated by Kava Equity Partners that will grow and diversify our portfolio,” said growth fund executive director Shane Seibel, in a statement.

That’s it from me today. MK Flynn will bring you the Wire tomorrow.

If you have any thoughts on bid/ask, please email me at rafael.c@pei.group.

Cheers,

Rafael