cool deals i wish i had done


blue dog 2Over the past five years, interest in the potential and performance of the online channel for pet products has become an increasingly hot topic.  The narrative around pet ecommerce has been fueled, in part, by a change in ownership demographics, but more significantly by the lack of transparent data regarding the size of and growth rate in the channel.  Quite simply, no one knows how much pet food is sold online or how fast the channel is actually growing, and therefore everyone is free to speculate.  The loss of PetSmart as a public reporting entity only further exacerbated this reality.

What we have known for some time is that online is taking share and its growth is a key driver of malaise within major pet specialty.  Whether you source your information from Packaged Facts, IBISWorld, or Euromonitor, all three entities have online pet products sales in the U.S. growing at between 10% – 15%.  Further, according to Packaged Facts 2016 National Pet Owner Survey, 46% of pet owners buy products online, an increase of 5% from 2015. Thus, the intent from a consumer perspective continues to rise.  Additionally, Blue Buffalo, widely believed to be the top selling pet food brand online, CEO Billy Bishop commented, in the company’s most recent earnings call, that the shift to online is occurring much faster than anyone at Blue Buffalo anticipated.  Couple this with the fact that during FY16, Blue Buffalo’s share of sales outside of major pet specialty increased from 33% in Q1 to 41% by Q4 primarily behind the sharp increase in ecommerce.

No entity has been more responsible for shaking up the pet retail world than Chewy.com.  In November 2016, we got our first real glimpse into the organization when a Bloomberg article detailed that the company anticipated that it would generate $880 million in sales for the calendar year.  Further, it projected 70% growth in 2017, bringing the company’s topline to $1.5 billion.  A recent Miami Herald article pushed that number to $2 billion. According to a recent survey by 1010data, Chewy.com has approximately 51% share of the online pet products market including autoship revenues.  This contrasts with Amazon at 35%, also inclusive of autoship.  Chewy also leads in subscription pet food sales at 10.2% versus 7.6% for Amazon.  PetSmart garners 7.9% of the market when you consolidate its own banner (2.2%) with sales of its Pet360 (5.7%) acquisition.  Petco clocks in at 3.1%, while Wal Mart (< 1%) barely registers. Finally, Chewy employs 200 full time portrait artists who churn out 700 oil paintings a week for unsuspecting customers.

Chewy, which has never turned a profit and has been funded by $261 million of equity, raised over five rounds, and $90 million of debt, is in the process of upping the table stakes.  The company recently launched its American Journey house brand of dry kibble.  American Journey, which comes in seven flavors, currently costs $39.99 for a 25-lb. bag before autoship discount.  This is $8 – $10 less than a comparable sized bag of Blue Buffalo on the site.  Notably, American Journey is made by one of Blue Buffalo’s co-packers. Additionally, Chewy launched Tylee’s, their human grade fresh/frozen pet food brand aimed squarely at the increasing band of upstarts seeking to deliver human meal equivalents for your pet. The company is also said to be working on a public offering slated for 2018.

The question of whether Chewy.com can be stopped has been answered. It’s most recent financings ($75 million of equity from BlackRock and $90 million in debt from Wells Fargo) suggest that investors are looking past the profitability profile and instead focusing on the growth history and the potential IPO valuation.  Mutual funds targeting a pre-IPO stake are likely accessible should the company need additional funding. The more intriguing question is whether there is a transaction alternative that might be more attractive to Chewy shareholders than a public offering.  As Chewy.com Chairman Mark Vadon, who co-founded Zulily, can attest, being a public company without earnings is not all that it is cracked up to be.  We rule out an Amazon combination for a myriad of reasons.  This leads us to Petco or PetSmart as the most logical destination.  While somewhat counter-intuitive on the surface, if Chewy.com could extract more value in a combination than an IPO, why not consider it?  Given the weak comps we have been hearing coming out of Petco and PetSmart, a combination with Chewy.com would solve a myriad of problems.  Chewy would gain access to cash flow and hundreds of local warehouses, while Petco or PetSmart would be able to rationalize its store base and gain the pole position in pet omni-channel.  It might not be as far-fetched as we think.

/bryan

Note: This blog is for informational purposes only. The opinions expressed reflect my view as of the publishing date, which are subject to change. While this post utilizes data sources I consider reliable, I cannot guarantee the accuracy of any third party cited herein.

 

 

thAnxiety about ecommerce in the pet industry is not a new phenomenon.  I’ve had it for a while; it seems to come in waves.  Often the “worry” is overcome through the most limited acceptable response from a market participant, just sufficient enough to satisfy my concerns. Most recently, my unease related to the future of Chewy.com, the leading independent ecommerce player in the industry.  My fear was that should Chewy be cut off from the capital markets, it could lead to a meltdown given its operating profile and cash burn, setting the online component of the industry back for a decade, from which it may not recover.  Thankfully, for the moment, my concern has been assuaged with the announcement of the company’s most recent funding, a $75 million investment from investment management firm Blackrock.

Pet ecommerce is a bit of an enigma, wrapped inside a riddle, wrapped inside a conundrum.  The conundrum — the perceived potential for cannibalization of four wall retail revenue — started it all in my opinion (others will quibble here, but to do so would merely be a digression).  For years, Petco and PetSmart buried their head in the sand about the potential for ecommerce in the pet industry. As the dominant retailers in the category, their view was akin to “why promote it, if you don’t want it to happen?”. The number three and four retail players possess a limited to non-existent ecommerce capability set as well.  The riddle was how to get a 25 – 40 lb. bag of dog food to a customer’s door without going broke in the process.  The failures of those who tried to solve the riddle, before the needs of customers were sufficient to want it or the infrastructure was available to make it happen, only served to reinforce the conundrum.  The cost problem has been addressed in a variety of ways ranging from infrastructure partnerships, to rising consumer demand, to subscription services, to more effective cross selling of higher margin products to online consumers.  The enigma remains how much ecommerce is influencing the pet industry and the trajectory of its largest retail players.

Depending on what you believe, online sales of pet products accounts for 6% – 10% of industry sales, or $4 – $6 billion.  Again, depending on your source, online sales for pet products is growing at 12% – 20% and enjoys the highest sales penetration of any home care category in the U.S.  However, the U.S. trails both the UK and China in terms of sales penetration of pet food online.  Of these estimated sales, we now know Chewy.com makes up $880 million of them, according to a Bloomberg article where the notoriously secret company disclosed details of it’s most recent funding, a $75 million equity financing from Blackrock.

To date, Chewy.com has raised $236 million (or $248 million depending on your source) in equity from a variety of institutional investors.  There is no complete data source that can reconcile that number — mapping the who, the when, and the how much.  However, we do know investors have migrated from traditional venture capitalist (Volition Capital and Greenspring Associates) to mutual funds whose investments often are a precursor to an IPO (T. Rowe Price and Blackrock). These fund have been necessary to fuel the company’s hyper growth, which has been driven by aggressive customer acquisition and rock bottom pricing for customers.  You don’t go from $0 to $880 million in online revenue in five years without a significant war chest and a willingness to buy customers at essentially whatever cost is required

However, on the way to becoming a pet industry unicorn, Chewy.com’s world began to morph.  First, Jet.com added the category and began to compete aggressively for customers driving up acquisition costs for all the major players and driving down profits for price matching entities as Jet sought to undercut the market when possible. With Jet’s acquisition by Wal-Mart, this issue may abate over time in the name of its parent company’s earnings and ROI requirements. Second, the major physical retailers began to quietly fight back, threatening punitive action for brands that would not enforce MAP online.  While MAP would be a net positive of Chewy’s margin profile, it would likely have come at the cost of growth, a necessity to access the capital markets.  Finally, was the issue of the most recent election cycle.  As Chewy sought to fund its business it was likely going to be pushed towards foreign markets or an IPO, as a trade sale at an attractive price appears unlikely unless you view the business as a capability acquisition and not a category play. Based on the trade and capital markets forecasts for the incoming political regime, there are concerns about slowing foreign investment in U.S. companies against a back drop of changing trade policies and the potential for the IPO window to close as a result of a market contraction.  While neither of these may come to pass, the concerns are real.  This makes the most recent announcement by Chewy to be welcome news, in my opinion, for all independent pet ecommerce players.

Should the public capital markets continue to be inviting, expect an S-1 sometime in 2017 for Chewy.com.  Further, cross off another of our anticipated transitional events for the pet industry in 2016 – 2017 (see here).

/bryan

Note: This blog is for informational purposes only. The opinions expressed reflect my view as of the publishing date, which are subject to change.  While this post utilizes data sources I consider reliable, I cannot guarantee the accuracy of any third party cited herein.

 

dwarfEarlier this week it was announced that Mars Petcare had acquired Whistle Labs, designer and marketer of activity monitoring and asset tracking solutions for small companion animals.  The deal was valued at $117 million (or $119 million depending on the source of information).  Whistle had raised $25 million in outside capital, including $21 million in two institutional rounds, including a $15 million Series B round in January 2015, led by Nokia Growth Partners.  The Series B also including participation from, among others,  Melo7 Tech Ventures (the equity fund of Carmelo Anthony, NBA superstar) and QueensBridge Venture Partner (the equity fund of Nasir Jones, world famous rapper).  The post-money on the Series B was reported to be $26.65 million, meaning these investors made a ~ 4.5x cash-on-cash return on the sale and triple digit internal rate of return based on the short duration.

When Whistle launched its solution set the market was bifurcated between activity monitoring and asset tracking.  The asset tracking side was being addressed largely by companies that were re-purposing technology that had been deployed in more traditional markets, such as logistics, automobile tracking, or human tracking (yes these do exist).  However, these companies did not necessarily recognize the emotional engagement aspects of the pet space, and did little to build community.  The network costs of these businesses were high, and the user base was small.  Given that the initial hardware purchase was subsidized, these businesses lost money, sometimes large amounts of it.  Further, there was no effective retail channel for this class of products as the major pet specialty retailers were not well situated to sell a $200 device with a monthly subscription attached thereto or explain the value proposition effectively to customers, and therefore the market was slow to emerge. Traditional channels, such as consumer electronics and mobile phone centers, were no more effective at attracting pet owners let alone articulating the purchase rationale.  It did not help that most of these solutions had large form factors and minimal visual appeal.

In contrast, Whistle brought to market an activity tracker with a high level of aesthetic appeal at a much lower cost.  Of significance, gone were the monthly subscriptions.  The problem was the market wanted asset tracking as the linkage between the activity monitor and the benefits use case was just not obvious to pet owners.  In short, there was data but not much to do with it and sharing it was cumbersome.  Much like the early human activity tracking sector, the real value of these devices did not emerge until the ecosystem and community aspect developed. Whistle would use part of its Series B financing to acquire Snaptracs, the Qualcomm based asset tracking solution that it spun out in 2013.  Using their industrial engineering acumen, Whistle combined the two solution sets into a best of breed offering and the business began to accelerate.

About the time of the Series B, Whistle began collaborating with Mars on the use cases of its device.  The challenge became how do you balance the venture capitalists agenda — drive brand, drive sales, drive community — with the Mars agenda around linking the data to wellness outcomes and product sales.  In the end, we believe Mars acquired Whistle to enable its agenda to become central to the future of the business.  Given that the lifetime value of a subscriber was high as the revenue was recurring, shareholder value increased exponentially.

While the acquisition and the prevailing purchase price will certainly give momentum to the connected pet space, the perceived rationale is somewhat vexing to rationalize.  Connected pet solutions that have been funded and launched into the market over the past few years have focused more on emotive connections (remote viewing, remote treating, automated feeding) than wellness outcomes, and here we have an acquisition rationale that we believe is tied more to healthcare outcomes than humanization. That is not to say the deal won’t be effective in catalyzing more investment and further M&A; the return profile will ensure that happens.

This deal very much validates the space, and we have been on record suggesting more large consolidators get into connected pet since 2013, when we marketed the Snaptracs business for sale.  We believe other large players will have to take notice and find avenues to take a position in connected pet. Further, we think the Mars acquisition rationale is specific to them and does not require a pivot by other operators to enhance their focus on wellness.  Mars is unique in that it is the only enterprise that has both veterinary hospitals and branded companion animal consumables, and therefore could view Whistle in a unique way and justify the purchase price as a result. It does help that they are a very large private enterprise and do not have to kowtow to outside shareholders.

One of the key themes we witnessed at the most recent Global Pet Expo was a proliferation of solutions aimed at connecting owners to their pets wherever they were resident at the time — the home, the grooming salon, the daycare or dog walker, the boarding facility. etc.  Expect the Whistle deal to give them all more conviction and attract a host of new entrants seeking to capitalize on the market opportunity. Ultimately, pet owners stand to benefit most.

/bryan

Note: This blog is for informational purposes only. The opinions expressed reflect my view as of the publishing date, which are subject to change.  While this post utilizes data sources I consider reliable, I cannot guarantee the accuracy of any third party cited herein.

 

 

petcoWhen Petco Animal Supplies agreed to be acquired by CVC Capital Partners and the Canada Pension Plan Investment Board for $4.6 billion, the Dow Jones Industrial Average was trading around 17,800.  The market had recovered from the August swoon that turned out to be the worst month for the index in five years. Concerns about a slowdown in China, falling oil prices, and possible rate hikes by the Federal Reserve, sent the index into a tailspin.  Now, a mere 90 days removed from that correction, the Dow stood within three percent of its 2015 high water mark, and little concern was expressed about mega-deals, such as the Petco transaction, getting to close.  Press releases for the deal indicated a closing would happen in 1Q2016.

When the deal was announced, it was also disclosed that the transaction would be supported by $3 billion in acquisition financing, underwritten by Barclays, Citigroup, Royal Bank of Canada, Credit Suisse, Nomura, and Macquarie.  The broad lender support was a function of the company’s strong credit profile and a favorable following with investors after multiple recapitalizations, which is reflected in its trading profile in the secondary loan market.  Further, PetSmart’s acquisition debt had been trading a favorable rates in the secondary market, boosting interest. However, the deal was subject to syndication that would happen in 1Q2016.  While there has been no indication with any issues in closing the deal, there is cause for concern.  When the debt package was originally negotiated, the credits market were choppy,  now they are downright turbulent with bankruptcies accelerating and junk bond issuances declining by over 70% year-over-year.  While these bankruptcies are primarily related to the energy markets and energy dependent segments, they have put a malaise into the large cap buyout credit market as a whole.  Notably, in January, Citigroup tweaked the terms of Petco’s loan package to make it more attractive to potential syndication partners.

I proffer an example of the credit market’s uneasiness in the case of Mills Fleet Farm Group. In 2015, KKR agreed to buy the family owned retailer of rural consumer goods, including pet products, for $1.2 billion. Mills Fleet operates 35 stores in Minnesota, Wisconsin, Iowa and North Dakota.  The deal was set to close in late 2015, before it ran into trouble with its debt package. No sell-side capital markets deck was willing to take the paper, and KKR was forced to sell finance a large portion of the debt package against a backdrop of large retailer earnings misses, which drove up pricing.  The sale of Mills Fleet closed on Leap Day 2016, fitting.

While we may not be able to draw a direct correlation between Mills Fleet and Petco, the deals fall into the same buyout class.  Further, if you look outside of these transactions not many large cap LBOs are closing.  Most of the recent multi-billion deals have involved strategic acquirors.  Ultimately, we expect the Petco transaction to close, but there may be more bumps in the road along the way.

/bryan

Note: This blog is for informational purposes only. The opinions expressed reflect my view as of the publishing date, which are subject to change.  While this post utilizes data sources I consider reliable, I cannot guarantee the accuracy of any third party cited herein.

 

 

beakersHistorically, the discourse around pet food delivered in alternative form factors (fresh/frozen, freeze-dried, dehydrated) has focused on the merits, or lack thereof, associated with feeding your pet raw protein. Lost behind the countless articles delving into the pros and cons of raw, has been the growth in both size and importance of this sub-category, and the value it has created for those who invested early in this category.

According to GfK point-of-sale data from the pet specialty channel for the 12 months ended August 2015, alternative form factor pet food was, in approximate terms, a $175 million market.  Based on these same figures for the prior year period, this represents 50%+ growth for the category.  When you add to this annualized IRI MULO data for fresh/frozen pet food sold in the mass market and apply an adjustment to GfK’s estimate of dehydrated pet food, which we know to be low, and the total market is approaching $750 million, growing at 30% – 35%.  While relative to dry kibble, this market is in fact small, it is meaningful, and in combination with its growth rate, cannot be ignored by the large strategic buyers in the space.

Validation of this notion began to accelerate in 2H2014 when Agrolimen SA, a Spanish privately-held producer of food and other consumer goods, quietly acquired a controlling stake in Nature’s Variety, the market leader in freeze-dried raw pet food, from Catterton Partners.  This was followed closely by the successful initial public offering by Freshpet, Inc. (NASDAQ: FPRT), which currently trades at 2.3x Revenue despite some challenges in the roll-out of their refrigerator program among several large retail accounts.

After a brief fallow period, further validation arrived in the form of Nestle SA’s acquisition of Merrick Pet Care. While Merrick’s market entry into the freeze dried raw space (Backcountry), was nascent, the fact that they had an in-market offering was clearly a benefit to the deal.  Around this same period, Stella & Chewy’s, LLC, a portfolio company of Stripes Group,  and the market leader in freeze-dried raw sold in the independent pet store channel, transitioned into a new 164,000 square-foot facility in Oak Creek, Wisconsin, funded by a debt package sourced by the company in early 2015.  On January 7, 2016, the company announced it had hired a highly seasoned consumer industry executive to run the company and recruited pet industry executive Mark Sapir as Chief Marketing Officer.  Sapir most recently served as VP of Marketing & Innovation at Merrick.  Finally, on January 8, 2016, it was disclosed that WellPet, LLC, a portfolio company of Berwind Corporation, and the owners of the Old Mother Hubbard (which had been previously owned by Catterton) and Eagle Pack Brands, had acquires Sojourner Farms, LLC, doing business as Sojos. Sojos is number two or three player in the dehydrated pet food space.  In addition to providing validation of both the freeze-dried raw and dehydrated solution set, it also provides further evidence that larger players in the consumables space will buy smaller brands, especially if those brands resonate with premium customers who shop independent pet specialty.

So what does this all mean? I believe there are two conclusions that can be drawn. First, that the alternative form factor pet food market is a real sub-category and mid-sized to large players need to pay attention to it, because consumers are buying into the category, and have a response for how to compete within it or counter its proliferation going forward. The category is no longer a novelty, something that market leaders can simply write off or ignore.  Second, it’s going to result in more transactions as strategics buy into the space in an effort to deliver a competitive response. The winners of this coming-of-age will be the entrepreneurs who pioneered the category and the private/growth equity firms that supported them.  With a limited set of properties available, it could send valuations, which have been trending down, back towards the upper end of the historical multiple range.

/bryan

Note: This blog is for informational purposes only. The opinions expressed reflect my view as of the publishing date, which are subject to change.  While this post utilizes data sources I consider reliable, I cannot guarantee the accuracy of any third party cited herein.

 

 

 

 

 

petcoOn November 23rd, CVC Capital Partners Limited and Canada Pension Plan Investment Board (the “Buyout Group”) signed a definitive agreement to acquire PETCO Animal Supplies, Inc. (“Petco”) from TPG Capital, L.P., Leonard Green & Partners, L.P., and friends for $4.6 billion. The deal values Petco at approximately 10.0x my pro-forma TTM Adjusted EBITDA for Petco as of October 31, 2015. This contrasts with the 9.0x TTM Adjusted EBITDA for the acquisition of PetSmart by BC Partners.  It is rumored that the Buyout Group was able to arrange approximately $3 billion of debt financing to support the deal.  Notably, both Petco and PetSmart will be owned by foreign investors assuming the deal closes.

It should come as no surprise that Petco opted for a private equity sale. Too much time had passed since the September 18th media leaks to believe a Petco / PetSmart combination would come together.  The case for public equity offering also faced numerous headwinds — a) broader stock market volatility driven by macro-political risk (Syria, ISIS, China), b) weaker than anticipated earnings among publicly traded retailers (as of November 20th over 40% of the retailers in the S&P 500 had posted earnings misses for 3Q2015), c) weak October retail sales (0.1% increase versus 0.3% consensus) and d) falling consumer confidence (lowest levels this year and a steep drop from October).  Against this backdrop, a trade sale was the most attractive option, even if debt market support for the deal had been choppy.  We generally consider 10.0X the break-point for specialty retailer M&A, above which history has not looked kindly on the buyer from a shareholder value creation standpoint.

The most pressing question now is who will lead the acquired organization going forward.  Jim Meyers, who has been in the CEO role since March 2004 (he was named Chairman earlier this year), and his team has lead Pecto back to a position of prominence.  Based on the S-1, Petco was posting stronger growth and better unit economics than its larger rival.  However, if history is a guide, large private equity deals seldom result in a staying of the course. In a small amount of irony, it is possible, though unlikely, that David Lenhardt could be running Petco a year after being ousted from PetSmart. Stranger things have happened.

If the Buyout Group is smart, they will purse incremental changes at Petco as opposed to a holistic approach to transformation. While there are certainly cost inefficiencies to be rung out of the system, Petco’s value is in how well it is currently situated from a growth standpoint with its greater emphasis on wellness, its multi-box positioning, its omnichannel reach and its under penetration in private label.  Further, with PetSmart deeply invested in its cost containment program, now is the time for Petco to press on the growth accelerator.  Someone is going to grab the brass ring and if not Petco, the chase will be led by Pet Supplies Plus, Pet Valu or a series of financially supported independent chains.

The next year should be an interesting one is large box pet retail land.  Regrettably we won’t be getting much transparency into either business any time soon.

/bryan

Note: This blog is for informational purposes only. The opinions expressed reflect my view as of the publishing date, which are subject to change.  While this post utilizes data sources I consider reliable, I cannot guarantee the accuracy of any third party cited herein.

 

 

 

 

 

aisleThe first quarter of 2015 has seen an unprecedented amount of announced and closed deals for the pet industry.  In combination, the acquisitions of Big Heart Brands and MWI Veterinary Supply coupled with the take private of PetSmart resulted in a combined deal consideration of $17 billion.  Not since Nestle S.A.’s acquisition of Ralston Purina for $12.1 billion in 2001 has the industry experienced such transaction volume, measured on a dollar basis, in a concentrated period. What is most notable about the Big Heart Brands and MWI Veterinary Supply transactions, beyond the headline valuations, is that they were driven by a convergence theme — that the companion animal industry has becoming comparable to its human corollary as to justify combinations across the aisle.  So much so, that major players on the human side can justify buying into the pet side at premium prices.

Consider Smucker’s acquisition of Big Heart.  Smucker’s, best known for their business in fruit spreads, coffee, and food service, has been experiencing revenue contraction and profit erosion since 2013, driven by declines in all lines of business. In an effort to reverse these declines the company, with one stroke of a pen, morphed itself into a pet business. Big Heart Brands is expected to deliver $2.4 billion in sales in 2015 to the combined entity, more than any other current line of business for Smucker’s. Big Heart is expected to grow between 5% – 6% each of the next two years, versus the balance of the company whose growth declined 4.9% in 2014 and whose growth is expected to decline another 4.1% in 2015. Three notable quotes from the company as part of the transaction speak to the convergence rationale of the acquisition:

  • “With approximately two-thirds of U.S. households having at least one family pet, we will now be able to serve the mealtime and snacking needs of the whole family.”
  • “[Big Heart Brands] fits extremely well with our purpose of bringing families together to share memorable meals and moments. And one of the key parts of the family nowadays, and probably has been historically, is your family pet.”
  • “Our competency is really connecting with our consumers and building an emotional bond with our customers. Pet foods is the same way. And so, we really see a real opportunity for continuing to build that bond with the consumer. And once you do that, you can really have great products at a right price.”

Additionally, as conventional grocery seeks to recover its share of the companion animal consumables pie, Smucker’s will be serving largely the same retailer base from a supply standpoint adding additional comfort to the contemplated transaction.

The acquisition of MWI Veterinary Supply by AmerisourceBergen is not the first instance of a veterinary supply business merging into a company involved in servicing the human health market. However, the deal between the largest human pharmaceutical distribution company and one of the leading independent players in pet medications was also borne out of their similarities. In a discussion of the deal rationale, the following key comments are notable from AmerisourceBergen CEO Steve Collis as it relates to convergence:

  • “As we got to know the MWI business better, it was more pharmaceutical-centric than we had realized.”
  • “We really felt that there was a lot of complexity in this business, a lot of ability to drive new products, working with manufacturers, and an opportunity for global expansion that really dovetailed well into some of the past experiences AmerisourceBergen had enjoyed and had experience and been successful at.”
  • “You know, they’re just a strong cultural fit. These are operators that are passionate about their business, that are trying to draw value for their customers and their stakeholders every day, so the two companies just could not have got on better.”

Notably in the deal announcement, AmerisourceBergen  stated that entering into the animal health market was a logical extension for the company and the fact that each of the businesses relied largely on the same core competencies gave them comfort in the potential for the combination.  Like the Smucker’s/Big Heart deal above, Collis made it clear they pursued the combination for the growth potential the pet industry offered them despite the fact AmerisourceBergen has produced robust topline growth in each of the past two fiscal years.

It will be interesting to watch how each of these deals delivers, or fails to deliver, on the anticipated potential of the combination.  To the extent that these transactions are part of a broader theme, multiples for pet related exits could reach even further into the stratosphere. The pet industry has been wanting for improved exit market dynamics and these examples provide optimism that companies serving the human market might now be ready to become serial acquirors of pet related properties. 

/bryan 

 Note: This blog is for informational purposes only. The opinions expressed reflect my view as of the publishing date, which are subject to change.  While this post utilizes data sources I consider reliable, I cannot guarantee the accuracy of any third party cited herein.

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