Jana Partners Starts New Activist Position in PetSmart Inc (PETM)

Barry Rosenstein’s Jana Partners disclosed a new position in PetSmart, Inc. (NASDAQ:PETM), a $6.7 billion market cap supplier of specialty products, services and solutions for the lifetime needs of pets in North America. The fund declared ownership of 9.82 million shares of the company (including options to purchase 4.73 million shares of Common Stock), which account for 9.9% of its outstanding stock. The 9.82 million shares were acquired at an aggregate purchase price of approximately $341 million. The stock of the company jumped by over 12% on Thursday on the back of Jana’s move.

Barry Rosenstein JANA PARTNERS

According to the Schedule 13D filed at the U.S. Securities and Exchange Commission Jana Partners purchased the stock “because it believes the Shares are undervalued and represent an attractive investment opportunity” (SEC). The fund intends to have discussions with PetSmart, Inc. (NASDAQ:PETM)’s Board of Directors and management regarding:

- A review of strategic alternatives, including the option of putting the company up for sale;

- Improving operating performance;

- The company’s capital structure, including providing for a significant return of capital to shareholders;

- Ameliorating the company’s capital allocation policy;

- Bettering PetSmart’s disclosure to shareholders;

- Management and board composition.

In addition to Mr. Rosenstein’s fund, several other major hedge funds are betting on PetSmart, Inc. (NASDAQ:PETM). James A. Star’s Longview Asset Management has been consistently increasing its stake in the company for more than one year now. The fund last declared –in late May- ownership of more than 8.399 million shares –worth more than $565 million at the current stock price, up from 7.446 million shares held by the end of the last reported quarter. This position accounts for approximately 13% of Longview Asset Management’s total equity portfolio’s value.

Other funds that seem bullish about this business are Bill Miller’s Legg Mason Capital Management, which started a position with 862,480 shares over Q1, and David Harding’s Winton Capital Management, which upped its stake by 40%, to 555,254 shares.

Furthermore, CNBC’s Jim Cramer assessed today Jana Partners’ stake in PetSmart. Cramer said that, although the website is terrible, the company has not done good with private level, the online competition estimates have been going down, and we’ve seen negative same-store sales for a while, the company operates in a terrific growth category, with relatively few competitors coming in; so, “get the omni-channel right, then PetSmart is worth a lot.” In fact, Mr. Cramer assures, Jana paid cheap for the stock; the price is expected to rise from now on.

Disclosure: Javier Hasse holds no position in any stocks or funds mentioned

 

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