CVC, CPPIB near $4.7 billion deal to acquire Petco-sources

(Adds background to the deal and industry)
By Lauren Hirsch and Greg Roumeliotis
Nov 22 (Reuters) - Private equity firm CVC Capital Partners
Ltd and Canada Pension Plan Investment Board (CPPIB) are nearing
a deal to acquire Petco Holdings Inc, valuing it at around $4.7
billion, including debt, according to people familiar with the
matter.
CVC's and CPPIB's consortium outbid other buyout firms in an
auction for Petco and is now finalizing terms with the U.S. pet
retailer's owners, private equity firms TPG Capital LP and
Leonard Green & Partners LP, the people said on Sunday.
The sources cautioned that the deal had not yet been
finalized and asked not to be identified because the
negotiations are confidential. TPG and CVC declined to comment,
while Petco, CPPIB and Leonard Green did not immediately respond
to requests for comment.
The deal comes at a challenging time for private equity
firms because choppy leveraged finance markets have made it more
difficult for them to secure the amount of debt that they are
accustomed to in order to juice higher investment returns.
CVC and CPPIB have secured more than $3 billion in debt
financing for the acquisition, some of the people added.
TPG and Leonard Green had also registered Petco with
regulators for an initial public offering, which they would have
proceeded with if offers for the company were far below their
valuation expectations.
Petco also explored the possibility of being acquired by
larger rival PetSmart Inc (O:PETM), but talks did not progress because
the two sides could not agree on how to share the risk that
antitrust regulators could require significant store
divestitures, people familiar with the matter previously told
Reuters.
PetSmart was taken private earlier this year by a buyout
consortium led by BC Partners Ltd for $8.7 billion, including
debt.
The U.S. pet industry, which includes food, supplies,
veterinary services and non-medical services, was a $74 billion
market in 2014 and is projected to grow to $92 billion in 2019,
according to Petco's IPO registration document.
Based in San Diego, Petco operates more than 1,400 stores in
50 U.S. states. It had approximately $4 billion in sales in the
12 months to Jan. 31.