Activist shareholder Jana Partners barked loudly Monday that PetSmart brass should focus more on a sale than a stock buyback, but few private-equity firms — the most likely suitors — are interested in becoming pet owners, The Post has learned.
The PE firms that have kicked the tires of the 1,340-store chain are having a tough time making the financials work, a source familiar with the situation said.
“I think in this market you need a different view on growth,” a second source, working with some of the interested PE firms, said, referring to the challenges in the pet retail space, especially from Web-based rivals.
Some feel the Phoenix-based chain’s balance sheet will suffer, as it will be forced to close down under-performing stores while investing more heavily in its Web operation.
PetSmart has not yet engaged possible buyers, sources close to the situation said.
That includes brick-and-mortar rival Petco — viewed as the most likely strategic suitor. It is not known whether Petco, with 1,000-plus stores, even has any interest in such a deal.
Jana, in a letter Tuesday to PetSmart, called on the company “to conduct a full review of all strategic alternatives, including a sale.”
Jana owns a 9.8 percent stake in the 28-year-old chain.
While PetSmart’s growth prospect gave some PE shops pause, other suitors were said to be spooked by the problems Leonard Green & Partners and TPG Capital are having with their investment in Petco, a source said.
The two PE shops bought the San Diego chain in 2006 and have failed to find an exit after eight years.
The Petco owners might be interested in PetSmart if they believed they needed to get bigger to survive, a source said.
PetSmart’s shares fell less than 1 percent Tuesday, to $70.23 — and are off 3.5 percent this year.
Neither Leonard Green & Partners nor PetSmart returned calls for comment.