Jana Partners LLC announced late this week that it had acquired close to 10% of PetSmart. Jana Partners said it would ask for a meeting with the retailer of pet supplies about its strategic options including the possibility of a sale.
The investor, which manages over $10 billion in different assets, said in one of its regulatory filings that it would look to improve the operating performance of PetSmart and discuss a substantial return of capital for shareholders.
Shares of PetSmart increased in 2011 by 29%, and 33% during 2012. However, they were up just 6.5% during 2013, which was an underperformance in a market that rallied.
On Thursday, in a prepared statement, PetSmart said open communication was welcome with shareholders and constructive input is valued toward a goal of enhancing value to the shareholder.
Jana, which Barry Rosenstein operates, had waged other similar campaigns that were aimed at retailers over the past year.
Jana took on both Safeway Inc a chain of grocery stores and Outerwall Inc the parent company of Redbox the movie rental service.
Both companies then took steps that were similar to those Jana had proposed.
Jana’s filing was a signal it could ask for the sale of PetSmart, and the relatively low debt of PetSmart might make it an attractive acquisition by a private equity buyer.
The market capitalization of PetSmart is approximately $6.7 billion.
The interest Jana has in PetSmart comes while the company is dealing with sales that are lackluster and huge competition from rivals that are web based
Weak numbers of shoppers hurt many retailers in malls and in big box stores during the holiday season and into the first quarter of 2014.
However, analysts said the problems at PetSmart are deeper.
Little innovation has left PetSmart vulnerable to all competitions from retailers on Internet such as Petco and Wag.com.