JANA Partners Withdraws Director Candidates as Petsmart Agrees to Be Acquired

In a newly amended filing with the Securities and Exchange Commission, Barry Rosenstein‘s JANA Partners has announced that it is withdrawing the previously announced decision to nominate five candidates to be elected to the board of directors of PetSmart, Inc. (NASDAQ:PETM). The move came as PetSmart agreed to be acquired by a group led by BC Partners for $83.00 per share. 

Barry Rosenstein - Jana Partners

JANA Partners holds around 9.69 million shares of PetSmart, Inc. (NASDAQ:PETM), which represent 9.8% of the company’s outstanding common stock. The investor should be pleased by the news, since JANA has pushed for a sale of the company since summer. The fund added PetSmart to its equity portfolio at the beginning of July. Back then the stock jumped by more than 10% on the back of the disclosure of the stake.

Since initiating the stake, JANA has sent two letters to PetSmart, Inc. (NASDAQ:PETM)’s board of directors. In the first letter, the investor asked the board to reconsider their decision to conduct a leveraged recapitalization of the company, saying that it is not a good option that will increase the risk to shareholders. Instead, Mr. Rosenstein asked the board to analyze the possibility of a sale of the company. In the second letter, JANA stated that board’s decision to resist to its previous proposals will not generate any long-term value for shareholders and that it showed that the board was redoubling its efforts to avoid a strategic review of all options, such as the previously-mentioned sale of the company. However, as the board did not follow JANA’s proposals, the investor nominated five candidates to be elected to the board of directors at the next meeting of shareholders.

Another shareholder of PetSmart, Inc. (NASDAQ:PETM) is James A. Star’s Longview Asset Management, which holds 8.93 million shares of the company as of the end of September. Longview was one of the investors of PetSmart that disclosed the support for JANA’s proposal for sale of the company. In a letter sent to the board of PetSmart, Inc. (NASDAQ:PETM), Longview said that private equity investors might value PetSmart at a higher level than it was valued on the market at the time.

JANA Partners is a value-oriented, event-driven fund that focuses on companies that have a good management team, as well as great financials. Over the last couple of months, the fund went activist on companies like Hertz Global Holdings, Inc. (NYSE:HTZ), of which it owns a 7% stake. JANA has also managed to appoint three independent directors to the board of Civeo Corp (NYSE:CVEO), as well as Mr. Rosenstein was appointed to the board of Walgreen Company (NYSE:WAG) in September.

Disclosure: none