In a newly amended filing with the U.S. Securities and Exchange Commission, Longview Asset Management, managed by James A. Star, has disclosed a letter sent to the board of directors of PetSmart Inc. (NASDAQ:PETM). Longview is asking the board to consider exploring a sale of the company. According to the filing, Longview upped its stake in PetSmart Inc. (NASDAQ:PETM) to 8.93 million shares from around 8.40 million shares held previously. The new stake is equal to 9.0% of common stock shares.
In the letter, Longview states that it is writing in response to a 13D filed by Barry Rosenstein’s Jana Partners earlier this month, asking the company’s board to consider, among other issues, “a review of strategic alternatives including exploring a sale” of the company.
“Now that Jana has raised the possibility of a sale and that prominent brokerage firms have suggested that PetSmart is “in play,” we believe the board should consider this path for two reasons. First, our research suggests that Petsmart is likely to be valued much more highly by private market participants than by its current public market investors. Second, we are concerned that fending off a prolonged activist campaign will distract company employees at all levels from their primary task of selling goods and services to PetSmart’s customers and erode business value,” Longview added.
Further, Longview states that it recommends the board to engage advisors for the purpose of exploring this and other strategic alternatives.
“Should the Board determine a sale transaction to be in the interests of all shareholders, Longview clients would consider, depending on the parties and terms involved, rolling part or all of their holdings should it prove necessary to consummate a transaction,” according to the letter.
Barry Rosenstein’s Jana Partners disclosed a new position in PetSmart, Inc. (NASDAQ:PETM), owning 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.
PetSmart Inc. (NASDAQ:PETM) is a $6.7 billion market cap supplier of specialty products, services and solutions for the lifetime needs of pets in North America. On CNBC, the “Squawk on the Street” team talked about PetSmart, saying that the company has been in the new for a couple of days for a number of reasons, including Jana Partners’ new position and now Morgan Stanley upgraded the company to ‘equalweight.’
“There was a large short position in the stock and quite a few people believe that the thesis called for continued declines overall in the stock reflecting financial performance. Jana, for a while, shorted the stock, a seller then came in and bought it on a big selloff and built that 9.9% position, and there’s another activist adding to the voice to the chorus here saying capital return, capital return, and/or sale, and Morgan Stanley playing catchup here.”