PetSmart Inc. (NASDAQ: PETM) saw its shares surge higher in the premarket Wednesday, following its positive earnings report and talks of a potential buyout. This news could be bringing an end to what has been in development for months and months, and it could be a multibillion private equity buyout.
Kohlberg Kravis Roberts & Co. L.P. (NYSE: KKR) and Clayton, Dubilier & Rice are reportedly interested in taking PetSmart private for over $7.5 billion. Based on Tuesday’s closing price of $73.61, the company has a market cap of $7.31 billion. Reportedly, Apollo Global Management LLC (NYSE: APO) and BC Partners are also considering offers for the company.
PetSmart reported its third-quarter results as $1.02 in earnings per share and $1.74 billion in revenue, against a Thomson Reuters consensus estimate of $0.94 in earnings per share. These earnings helped propel the share price up even further, giving the company an even better valuation.
The largest stakeholders in the company reported at the end of September were:
- Jana Partners controlled 9.7 million shares. or 9.76% outstanding.
- Longview Asset Management controlled 8.9 million shares, or 8.99% outstanding.
- The Vanguard Group controlled 7.5 million shares or 7.53%.
ALSO READ: J.P. Morgan’s 5 Top International Stock Picks
24/7 Wall St. covered the potential buyout in September when Bank of America Merrill Lynch said there is “no doggone way PetSmart gets taken out.” The firm went back to a formal Underperform rating after having previously dropped it from coverage.
The report from Merrill Lynch signaled that fundamentals and new initiatives laid out by management are negative. These included cost reductions and broadening of mass food and omnichannel expansion, and the analysts feel the efforts are insufficient to turn around the business. Another view is that the sheer number of initiatives being simultaneously pursued only will increase the execution risks as it faces a number of structural and self-inflicted headwinds that helped to create three quarters of negative traffic.
However, since that time PetSmart shares have soared to 52-week highs, as recently as Tuesday, and Wednesday’s early trading was up as high as $77.20, versus a previous 52-week trading range of $55.00 to $75.44.
Shares of PetSmart closed Tuesday basically even at $73.62. Be advised that the stock has a consensus analyst price target all the way down at $65.56, but those targets are generally on a standalone valuation analysis rather than what a private equity buyout might see them worth.
ALSO READ: 10 Companies That Will Not Be Saved by the Bull Market Alone
Take Charge of Your Retirement In Just A Few Minutes (Sponsor)
Retirement planning doesn’t have to feel overwhelming. The key is finding expert guidance—and SmartAsset’s made it easier than ever for you to connect with a vetted financial advisor.
Here’s how it works:
- Answer a Few Simple Questions. Tell us a bit about your goals and preferences—it only takes a few minutes!
- Get Matched with Vetted Advisors Our smart tool matches you with up to three pre-screened, vetted advisors who serve your area and are held to a fiduciary standard to act in your best interests. Click here to begin
- Choose Your Fit Review their profiles, schedule an introductory call (or meet in person), and select the advisor who feel is right for you.
Why wait? Start building the retirement you’ve always dreamed of. Click here to get started today!
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.
Latest from 24/7
Our expert who first called NVIDIA in 2009 is predicting 2025 will see a historic AI breakthrough.
You can follow him investing $500,000 of his own money on our top AI stocks for free.