PetSmart subsidiary sets share price higher than expected

Cornelia Mascio
Giugno 15, 2019

The online pet supplies retailer was acquired by PetSmart in 2017 for around $3 billion.

Indicating solid investor appetite for a piece of the over $70 billion USA pet market, the offering was priced higher than the expected range and parent PetSmart sold more shares than originally planned.

Many market watchers have been fervently waiting for the listing, which was first thought to be between $17 and $19 per share, but was raised to the $19-$21 range and now has topped that mark.

Chewy generated sales of $3.5 billion in 2018 - up 67 percent from the prior year - as pet owners flocked to the company's offerings of pet food and toys.

Americans spent more than $72 billion on their pets previous year, with Chewy's 31% of USA online sales surpassed only by Amazon.com Inc.'s 55% share, according to the American Pet Products Association.

While excitement was present in Friday's trading, Chewy still faces some hurdles.

"Our active customers spend more and more the longer they stay with us", Singh said.

Cohen stepped down as Chewy's CEO in 2018.

The offering follows a heated dispute between PetSmart and its creditors over the transfer of Chewy assets ahead of the IPO. Lenders sued, arguing that PetSmart was insolvent at the time of the transfer and that the move was fraudulent. The exact amount of PetSmart's proceeds from the IPO that will go to pay down debt has yet to be determined.

Last July, Chewy launched its pharmacy business, pushing into the lucrative prescription drugs market that has always been the turf of veterinarians and their partners.

PetSmart and BC Partners will retain control of Chewy through Class B shares, which carry more voting power.

"A strong public-market showing by Chewy will be a positive due to the increased asset coverage it implies and the possibility that some of those assets will be monetized and used to pay down debt in the future", said Ben Briggs, a high yield and distressed credit analyst with INTL FCStone.

The offering was led by Morgan Stanley, JPMorgan Chase & Co. and Allen & Co.

Wall Street lapped up Chewy shares as they made their Friday debut on the New York Stock Exchange.

-With assistance from Emma Chandra and Matthew Monks.

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