Va. Beach-based company to acquire pet supply chain for $700M

The Franchise Group to acquire Pet Supplies Plus

Published January 25, 2021 by Sydney Lake

Virginia Beach-based franchise business operator Franchise Group Inc. announced Monday it will acquire Livonia, Michigan-based Pet Supplies Plus for approximately $700 million.

The all-cash transaction is expected to close in March. The Pet Supplies Plus retail chain was founded in 1988 and sells pet supplies and services at its more than 500 locations, almost 60% of which are franchised. It currently has a backlog of 185 new locations and also provides delivery and pickup for its products.

“We look forward to welcoming Pet Supplies Plus, its management team, employees, franchisees and neighbors to Franchise Group when this transaction closes,” Franchise Group President and CEO Brian Kahn said in a statement. “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.”

Pet Supplies Plus estimates 2020 systemwide revenue as $1.2 billion. Franchise Group in 2019 reported $2.1 billion in revenue and focuses on buying and investing in franchises and franchise-able businesses.

“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,” Kahn said in a statement.

The Franchise Group last year acquired Buddy’s Home Furnishings, The Vitamin Shoppe, Sears Outlet and American Freight. The company has also entered into commitments arranged by J.P. Morgan, Citizens Bank and Credit Suisse for $1.3 billion in new term loan credit facilities to refinance the company’s term loan for Buddy’s Home Furnishings, American Freight and Liberty Tax businesses and provide financing for the Pet Supplies Plus transaction.

Riley Securities served as financial adviser and Willkie Farr & Gallagher LLP served as legal counsel to Franchise Group. Pet Supplies Plus used Pipe Sandler, North Point and Baird as financial advisers and Kramer Levin as legal counsel.