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/
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