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Petco-PetSmart merger plan

The two largest retailers in the US pet care market are reportedly in merger talks.

Research firm IBISWorld estimates the two companies account for more than half of the US pet stores industry revenue.

News of fresh Petco-PetSmart merger negotiations follow the abandonment of an earlier plan over antitrust concerns.

Both companies are privately owned, Petco by private equity investors TPG Capital and Leonard Green & Partners. PetSmart is owned by another PE consortium, led by BC Partners which paid US$8.7 billion for the business, including debt, in March last year.

TPG’s group has commenced the process of a Petco IPO which would value the company at as much as $6 billion – but is said to be simultaneously pursuing a merger plan, and continuing talks with other prospective buyers, including other PE companies.

TPG believes a merger with PetSmart would achieve a higher price for the combined business, maximising their returns.

None of the parties have commented publicly on the discussions, with US news agencies quoting reliable sources speaking on the ground of anonymity.

California-based Petco achieved sales of about $4 billion in the year to January 31. Arizona-based PetSmart had sales of about $7.1 billion in the year to February 1.

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