Franchise Group Inc. on Jan. 25 agreed to acquire Pet Supplies Plus LLC from affiliates of private equity firm Sentinel Capital Partners LLC for about $700 million in cash.
Livonia, Mich.-based Pet Supplies Plus is an omnichannel retail chain and franchiser of pet supplies and services with more than 500 locations. It is expecting systemwide revenue of about $1.2 billion, company revenue of over $825 million and adjusted EBITDA of nearly $80 million for fiscal 2020.
The franchise operator said Pet Supplies Plus has deep omnichannel capabilities and a diversified revenue model consisting of corporate store revenue, royalties and revenue from internal distribution to franchisees.
"The additional scale and diversification that [Pet Supplies Plus] will afford Franchise Group is expected to immediately lead to lower costs of capital and expanded free cash flow generation," Franchise Group President and CEO Brian Kahn said.
To fund the purchase, Franchise Group entered into commitments arranged by J.P. Morgan, Citizens Bank and Credit Suisse for $1.3 billion in new term loan credit facilities, including commitments from an affiliate of B. Riley Financial for up to $300 million in unsecured financings.
The company expects the acquisition to be immediately accretive to its non-GAAP EPS in 2021 and bring in systemwide annualized revenue of over $3.6 billion for the group.
The deal is expected to close in March 2021, subject to regulatory approvals and other customary closing conditions.
B. Riley Securities was financial adviser to Franchise Group in the transaction while Willkie Farr & Gallagher LLP served as legal counsel. Piper Sandler, North Point and Baird served as financial advisers to Pets Supplies Plus while Kramer Levin provided legal counsel.