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Private Equity Firms Reportedly in Talks Seeking Petco Purchase

Leaders of Petco Animal Supplies Inc. recently welcomed visitors to the company’s new 300,000-square-foot headquarters facility in Rancho Bernardo. But officials at press time remained mum on reports that at least four private-equity firms are seeking to take over the pet products retailer.

Chairman and CEO Jim Myers said the company would not be able to comment on that or other recent reports of corporate maneuverings swirling around it, citing a required “quiet period” in relation to Petco’s own August filing for an initial public offering of stock.

Citing sources with knowledge of the matter, Bloomberg News reported that buyout firms KKR & Co., CVC Capital Partners, Apollo Global Management and Hellman & Friedman were all in talks with Petco’s current private-equity owners related to a possible takeover.

The suitors were all expected to make presentations to Petco management later in the week, following Bloomberg’s Oct. 14 report, with bids due to be submitted next month. Petco was taken private in 2006 by TPG and Leonard Green & Partners in a $1.8 billion leveraged buyout.

The latest events followed earlier reporting by financial media that Petco’s chief competitor, Phoenix-based PetSmart Inc., was in talks to acquire Petco, but talks stalled over issues including how to share financial risk in getting the deal approved by federal antitrust regulators.

None of that was discussed at Petco’s Oct. 14 open house, where company leaders showed off the new headquarters campus on Via Frontera to local dignitaries and media. Petco recently completed a two-year, $70 million purchase and extensive renovation of a former computer-chip manufacturing facility vacated several years ago by Unisys Corp.

“This at one time was the basement of the chip plant,” said Myers in an interview after the company ceremony, standing in the middle of what is now a sunlight-filled events space on the building’s lower floor.

Following necessary environmental cleanups, Petco gutted the now 33-year-old building to incorporate sustainable elements, installing dozens of skylights and solar panels. There is an onsite fitness center, café, and other spaces geared toward worker collaboration, with several conference rooms each graced with a full-wall mural depicting a breed of dog.

True to the 50-year-old company’s passion for pets, employees are welcome to bring their dogs to work, and the campus exterior sports three fenced-in dog parks, geared to canines of various sizes. Elsewhere on the inside, the facility has several aquariums filled with exotic fish, live coral and, in one instance, a chameleon lizard that a handler said was hatched in Vista.

Petco consolidated operations from several smaller facilities in the Miramar area, and about 650 employees now work at the Rancho Bernardo headquarters and corporate support center. Approximately 400 are at the company’s support center in San Antonio, Texas, which opened in 2011.

The local facility also has a photo and production studio where Petco prepares much of its marketing materials, along with a full-size mock retail store where the company will test out new fixtures, product displays and merchandise mixes, before they are eventually deployed at the retailer’s more than 1,400 U.S. stores.

Myers said Petco, which had $4 billion in 2014 sales, will be aiming in the future to boost its sales presence through Web and mobile channels. It is also looking to add to its current count of more than 120 locations of its small-format Unleashed by Petco stores — about one-third the size of a standard Petco — which allow the company to operate in a larger variety of retail locations, including in central urban neighborhoods.

Petco employs more than 25,000 nationwide, including approximately 1,200 in San Diego County.

San Diego City Councilmember Mark Kersey, whose District 5 includes Rancho Bernardo, said the arrival of Petco reflects a continuing transformation that has unfolded in the neighborhood’s business campuses over the past five decades, as the area grows beyond what was once a dominant presence of electronics manufacturing plants.

“There was a time when just about every Sony TV sold in America was manufactured on this street,” Kersey said.

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