Can PetSmart, Inc. (PETM) Go to Amazon.com, Inc. (AMZN)?

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Pet retailer, PetSmart, Inc. (NASDAQ:PETM), appears to be a company under siege. Some of the investors with a significant stake in the company are pushing to have it sold out. However, the company has been trying a turnaround even with the recent deal to purchase Pet360 for $130 million. Can Amazon.com, Inc. (NASDAQ:AMZN) be the recipient of the troubled company? On Fox Business, Mike Spector and Dana Mattioli from The Wall Street Journal looked at PetSmart’s buyout story.

petsmart

It is worth noting that PetSmart, Inc. (NASDAQ:PETM) recently posted second-quarter earnings in which it reported higher earnings than the like quarter a year earlier. It earned $98.1 million or $0.98 a share, which compared with earnings of $93.4 million or $0.89 a share in the same quarter in 2013. The management reported that the revenue advanced 1.4% in the latest quarter compared with last year’s figures. However, the seemingly positive results have not quenched the thirst of investors that want the company sold to a willing buyer. Names such as Amazon.com, Inc. (NASDAQ:AMZN) are being mentioned as possible buyers of PetSmart, Inc. (NASDAQ:PETM).

“Actually, a sale process here could actually be difficult because likely scenarios you look at are potentially challenging. Naturally, you would think of Petco as a potential acquirer of PetSmart. But the problem there is Petco is owned by private equity firm […],” stated Spector.

He also said that Amazon.com, Inc. (NASDAQ:AMZN) looks like a good buyer for PetSmart, Inc. (NASDAQ:PETM). However, Mattioli said that Amazon already has its own pet-related services.

“[….] So, there are other ways to get your pet food, and that makes this less desirable for maybe a strategic buyer because the whole market has been disrupted,” noted Mattioli.

Besides the challenge that associated companies like Amazon.com, Inc. (NASDAQ:AMZN) may not be enthusiastic taking over PetSmart, Inc. (NASDAQ:PETM), there is also the issue of cost. PetSmart is a $7 billion company, which means that even if a private equity firm were interested in buying it, the cost would call for two or more private equity firms clubbing, but that is something that private equity firms have been running away from in recent times.

Barry Rosenstein‘s Jana Partners owns 4.94 million shares of PetSmart, Inc. (NASDAQ:PETM), the position was initiated in the second quarter of 2014.

 

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