Graham Partners Creates Pet Food Platform BrightPet Nutrition Group, LLC

Graham Partners is now one of many private equity firms focusing on the growing industry of superior quality and healthy pet food, as evidence by its acquisition of BrightPet Nutrition Group. The BrightPet platform was formed by acquiring co-packers Ohio Pet Food and Southern Tier Pet Nutrition as well as Blackwood Pet Food. Going forward, Graham likely will seek bolt-on acquisitions to grow the USDA Certified Organic pet food and treat producer. The Company’s products currently are sold exclusively through independent retailers, but with the new investment it will be interesting to see if it begins distribution into pet super-stores or grocery aisles.

Sources:

http://www.grahampartners.net/article/bone-appetit-graham-partners-latest-investment-helps-pets-eat-healthier/

http://www.petfoodindustry.com/articles/5788-pet-food-manufacturers-combine-to-create-brightpet

http://www.grahampartners.net/portfolio/

Q1 2016 Pet Industry Report – Available Now!

Industry Overview

Our observations from the 2016 Global Pet Expo in Orlando and newly released data confirm to us that the ongoing humanization of pets is growing beyond the $30-billion U.S. pet food market and into the more broad health and wellness industry. In a March 2016 Nielsen Survey of American and French pet owners, 85% stated that they believe food choices can extend the lives of their pets. In addition, a 2015 Packaged Facts Report stated that 74% of owners strongly agree or somewhat agree that high-quality dog foods are effective for preventive health care, up from 51% in 2014. New product offerings, M&A transactions and overarching trends seen in the Pet Industry continue to be decidedly similar to human consumer trends in food, healthcare and wearable technology.

Within the Food and Treats segments, not only have ingredients and sources in pet food become more scrutinized, but also large players are now competing for market share from pet owners who are treating their dogs and cats to non-GMO, grain-free, raw, supplemental or other fundamental food products. WellPet added more natural and raw food options to its product offering through M&A. By acquiring Sojourner Farms LLC, the company added the Sojos line of homemade, all natural, freeze dried, raw pet food to its healthy and natural brand portfolio. Zuke’s also announced that it will be expanding its treat-based business to include natural dog food. Available in summer 2016, Zuke’s Ascent Natural Dog Food will be…

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Quarterly Pet Industry Report – Available Now!

Industry Overview

The Pet Industry finished 2015 strong after a busy year of M&A activity fueled by favorable trends. As consumers continue “humanizing” their pets and are more concerned with ingredients and brand reputation, strategic acquirers are targeting niche brands with dedicated customer bases. The increasing demand for organic and/or eco-friendly food and products reflects greater pet health consciousness. Treating pets as members of the family drives pet owners to spend more on their animals, creating higher margins across all industry subsectors, including premium food and treats, developmental toys and advanced veterinary care.

The persisting trend of pet humanization has led to the increased presence of basic pet products in popular channels such as supermarkets, discount department stores and online retailers. According to the 2015-2016 National Pet Owners Survey, approximately 65% of U.S. households own a pet. These trends could affect…

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Petco at a Crossroads

Nicholas Durante of Celestial Market Research has published an interesting analysis exploring Petco’s current dilemma whether to follow through on its IPO filing or to seek a private placement. Petco filed its S-1 in August but has since been in talks with private-equity groups KKR and The Carlyle Group about a full sale and also has been in talks with PetSmart about a merger. Durante points out that the private-equity backed company is heavily leveraged with over $2.3 billion in total debt that has resulted in a “crushed” equity valuation of approximately $958 million. Given the recent volatility of public markets and the poor reception of IPOs, particularly highly leveraged private-equity backed IPOs, it seems clear that Petco would prefer an M&A deal to an IPO gamble.

Sources: http://seekingalpha.com/article/3671216-petco-ipo-or-m-and-a  and http://www.petproductnews.com/November-2015/PetSmart-and-Petco-Gear-Up-to-Throw-Down/

Potential PetSmart-Petco Merger Raises Concerns

Petco is currently exploring the possibility of being acquired by its biggest competitor, PetSmart. The two companies considered this merger last year, but the deal fell through as a result of antitrust concerns. A joint Petco-PetSmart would control roughly 30% of the U.S. specialty pet retail market, raising concerns of antitrust issues. Such issues could result in closure of many of the merged Company’s stores. Other analysts speculated that although synergies would be generated from the merger, the combined Company would have a huge amount of debt and such movement would not address more urgent issues such as increasing competition from online retail stores.

Read more here: http://www.cbsnews.com/news/a-petsmart-petco-merger-might-not-add-up/

Pet Valu Expands US Reach

The major Canadian pet retail chain, Pet Valu, completed its acquisition of Ohio-based pet retailer Jack’s Pets for an undisclosed amount this month. Pet Valu plans to invest up to $4mm to renovate and convert the Jack’s locations to align with the Pet Valu brand, including self-serve dog-washing stations. This acquisition is a major step in the Company’s strategic Midwest expansion. Pet Valu plans to expand the Jack’s branches from 32 to 100 stores. The next cities targeted for locations include Cleveland, Toledo and Pittsburgh.

Read more here: http://www.bizjournals.com/dayton/news/2015/04/03/pet-valu-to-invest-4m-in-jack-s-pets-conversion.html

Mud Bay Owners Exit with ESOP

Mud Bay, a boutique pet retailer focused on healthy and specialty pet products, announced that current owners will be selling the Company to its employees through an Employee Stock Ownership Plan (ESOP). This alternative exit strategy will allow current co-CEOs and siblings Lars and Marisa Wulff to transfer their equity shares to the Company’s 320 employees.

The prevalence of owner exits through ESOPs has grown over recent years, with benefits including capital gains tax deferral for sellers and improved employee performance through ownership incentive. For more information regarding ESOPs click here.

To read more about Mud Bay’s ESOP, click here.

Petco Files to Go Public

After months of IPO rumors, Petco Animal Supplies filed for its third initial public offering on August 17. Petco, currently a portfolio company of TPG and Leonard Green & Partners, was taken private through an LBO in 2006 by its current owners for $1.8bn. The Company announced that it plans to raise approximately $100mm; although, details of the IPO were not disclosed. Comparatively, PetSmart was taken private earlier this year for roughly $8.9bn and Blue Buffalo raised $677mm in its IPO last month.

Read more: http://fortune.com/2015/08/17/pet-retailer-petco-files-to-go-public/

Nestlé Purina Acquires Merrick Pet Care

Nestlé Purina acquired Merrick Pet Care, premium natural and organic dog and cat food producer, for an undisclosed amount in late July. Nestlé Purina purchased Merrick from Swander Pace Capital, which has owned Merrick since 2010. Nestlé Purina, which holds approximately 35% of US dog and cat food sales, has been heavily investing in the growth of its natural foods segment. In 2013, Nestlé Purina acquired Zuke’s, a specialty natural pet treat company based out of Colorado.

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Blue Buffalo Raises $677mm in IPO

On July 22, Blue Buffalo went public, becoming the fifth largest IPO of the year. The company, which makes all-natural cat and dog food, priced its shares at $20 Tuesday evening but closed the following day at $27.20 after the IPO. Private equity firm Invus Group took a 62% majority stake in the company. Blue Buffalo has experienced almost 30% year over year growth since 2013, largely due to growing demand for all-natural and healthy pet products.

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