PetSmart Gobbled Up in $8.3 Billion Deal

The pet retailer was bought in the largest leverage buyout deal this year.
4:40 | 12/15/14

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Transcript for PetSmart Gobbled Up in $8.3 Billion Deal
Okay. It is Monday December 15 the markets in New York growth in our big number this morning eight point three billion dollars that. It's how much pets mart the nation's largest specialty pet retailer will be fought for by corporate investors all led by private equity fund BC partners. Now this eight point three billion dollar bid makes it the largest leveraged buyout deal so far in 2014 continuing this massive M and a trend. On Wall Street this year when I'm down Cutler in New York here at the tales Scott gam from the streets got good Monday morning to you. Good morning Dan so get background on this deal PetSmart actively shopping itself this hadn't come out of nowhere I guess. Well over the summer you know the shareholders of PetSmart had been urging the board can make a sale largely on the heels. Cells which weren't doing. That great so this didn't come Mitchell much of a surprise we sort of saw this. But again it's the largest deal of the year the second largest was black stones acquisition. Of gates global and auto parts maker that was five point four billion dollars now private equity deals typically involved. These companies acquiring struggling companies they take on a lot of debt. And they try to turn the company around and about ten years and then sell it for profit they give it like flipping a house of is that while I was pets mart and so attractive. Wells attractive largely for BC partners because that private equity firm has been looking to develop a consumer. And retail presence in the United States and PetSmart gives them that opportunity. And again pets mart wasn't doing that great so this gives them an opportunity. To really turn the company around pets mart has lost market share from the likes of target and Wal-Mart and certainly the web so sort of a win win for everyone involved. Well this particular market is very strong it's I was staggered as to these numbers the pet industry value at around 59 billion dollars a year. I mean that's a lot of dog food beyond just that those Simon guessing that Wall Street had a pretty good idea that the pet history's gonna continue to grow. Writing in they would have done this deal if they didn't think. That there were opportunities here mean I wouldn't. Who you know make a broad generalization that the whole industry is booming but. You know DC partners is gonna look at this on a case by case basis and certainly they're gonna try to steal back some of the market share for PetSmart that they lost for more broad retailers like your general department stores. And certainly the way have been so that's one of the main goals of this acquisition is to bolster PetSmart. Rather than necessarily an endorsement of the industry as a whole. What talks a little bit that is specific committee put away from that the pet industry and an analysis that but the deal is is seen as somewhat of a win for activists like Jana partners. They pressure the company put itself up for sale so that just been another in the strain of this happening in 2014. Is this your basically get any known as the activist investor year. We'll look activist investors had gained a ton of momentum in recent years. And you know looked her in that business to make money so they feel that an acquisition a private equity deal is gonna make that money they're gonna voice their opinion and they have it. A unique knack for. Using the media and social media to their advantage to get what they want to be of course saw this with Carl Icahn the billionaire investor. Who pressured apple to buy back some of its share because of course apple had record amounts of cash from its balance sheet. And so keep thought that that would make shares more valuable. But again everyone's trying to make money here so they think that there's an opportunity they're certainly going to let everyone know. So in the introduction was of this is going to be the biggest LBO of 2014 so far. Does that mean in factual and could see some more deals coming before the year closes out. Yeah I mean we only have two weeks I don't see me you know any major deals in in in the pipeline certainly of course that could change but. You know 2014 was a pretty lackluster pretty quiet deal. Environment for the private equity space. And you know that is largely on the heels of more regulation. A plot the stock market has been rising despite some volatility in recent weeks of these companies are more expensive to acquire. So private equity isn't looking too attractive but of course on the flip side you have IPO is. And I and our host of companies trying to go public so flavor Jim was a huge year for IPOs. That's expected to continue into each when he fifteen but of course the private equity space. Has been quiet in recent months. Quite recent months all right Scott get from the street Scott thanks so much have a good Monday. Thanks and you do you can keep up with latest headlines are here and abcnews.com. You've been watching the big number and Dan where New York.

This transcript has been automatically generated and may not be 100% accurate.

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