Pet Supplies Plus Finds a Buyer for $700M

Private equity firm Sentinel Capital Partners plans to sell Pet Supplies Plus, the third largest pet specialty chain in the U.S., to Franchise Group, Inc. in an all cash transaction valued at approximately $700 million.

Founded in 1988 and headquartered in Livonia, MI, Pet Supplies Plus (PSP) is a franchisor and operator of pet-specialty stores that provide a customer-centric shopping experience in smaller stores that have a neighborhood feel. PSP blends the advantages of national scale with those of a friendly, local neighborhood pet store. Stores have a streamlined design, which makes them easy to navigate, and PSP also offers online shopping alternatives with same-day delivery from local stores or curbside pick-up.

PSP's footprint includes 537 stores covering 36 states, up from 448 stores serving 33 states at the time of Sentinel's acquisition two years ago. Almost 60% of the retailer’s locations are franchised. PSP has a diversified revenue model comprised of corporate store revenue, royalties and revenue from internal distribution to franchisees. Additionally, PSP has developed broad omnichannel capabilities, offering varied cost-competitive shopping options through its locations, direct-to-consumer local delivery and buy-online-pickup-in-store model.

"It was a pleasure to partner with Sentinel as we significantly grew the franchisee base through geographic in-fill and expansion into white space," said Chris Rowland, CEO of Pet Supplies Plus. "Sentinel's deep experience investing in franchise-related businesses was a great asset to us throughout this entire period."

"We are extremely pleased with PSP's significant expansion and successful integration of new franchisees into its system," said Marc Buan, a Sentinel Principal. "PSP is the No. 1 pet franchisor in the U.S. in an attractive, growing market driven by loyal consumers passionate about pet ownership.”

Franchise Group, Inc. estimates that the net present value of the tax benefits related to the transaction are expected to be approximately $100 million. The sale is expected to close in March 2021 and result in systemwide annualized revenue for Franchise Group of more than $3.6 billion.

“We look forward to welcoming Pet Supplies Plus, its management team, employees, franchisees and neighbors to Franchise Group when this Transaction closes,” said Brian Kahn, president & CEO of Franchise Group. “PSP adds another franchise concept with strong unit economics, diversification into an economically resilient and secularly growing pet industry, and a brand that has and will continue to experience robust unit expansion from its franchise system. The additional scale and diversification that PSP will afford Franchise Group is expected to immediately lead to lower costs of capital and expanded free cash flow generation. We look forward to partnering with PSP’s outstanding and long tenured management team to accelerate their already ambitious expansion plans while leveraging Franchise Group’s best practice functions to drive incremental efficiencies.”