Petco Owners Weighing $6 Billion Sale or Public Offering

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The owners of Petco Animal Supplies Inc. are exploring a sale or initial public offering that could value the retail chain at $6 billion, including debt, according to people with knowledge of the matter.

CVC Capital Partners and Canada Pension Plan Investment Board are interviewing potential advisers while reviewing strategic options, said the people, who requested anonymity because the talks are private. Formal efforts around a sale or IPO are not expected to kick off until next year, one of them said. The owners could still decide to retain the company.

Representatives for CVC and CPPIB declined to comment. A representative for Petco didn’t immediately respond to requests for comment.

Petco has grappled with challenges including rising competition and disruptions to consumer spending amid the coronavirus pandemic. Moody’s Investors Service downgraded Petco’s corporate family rating and probability of default rating deeper into junk territory in April, citing a tough competitive landscape despite the chain’s substantial market presence.

While the pet products industry remains relatively recession-resilient, Moody’s said, consumers have a number of online alternatives, including Amazon and PetSmart-backed Chewy, as well as mass channels such as Walmart and Target.

A Petco loan maturing in 2023 last traded at 86.8 cents on the dollar, according to data compiled by Bloomberg.

Petco, led by Chief Executive Officer Ron Coughlin, currently operates more than 1,500 stores across the U.S., Puerto Rico and Mexico, according to its website. Some offer pet care services, veterinary advice and vaccination clinics, and the company also has a digital health service known as PetCoach.

Private equity investors CVC and CPPIB acquired the San Diego-based company for $4.6 billion from TPG and Leonard Green in 2016, a decade after those two firms took Petco private.

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