SPAC KKR Acquisition Holdings Corp. might be taking pet retailer PetSmart public. If the reverse merger deal goes through, it would mark the second time that the company has gone public on the stock market.
PetSmart-owned Chewy (NYSE:CHWY) has been on the market since 2019, four years after PetSmart’s public-to-private transaction. Will PetSmart’s public deal go through and what will happen to Chewy stock if it does?
PetSmart is in talks to go public via a SPAC.
KKR Acquisition Holdings Corp. is targeting PetSmart to take public in a reverse merger. KKR is currently trading as a blank-check firm on the NYSE under the ticker symbol “KAHC.”
If the deal goes through, the firm will transition to a PetSmart-branded ticker representing the acquired company. KKR hit the market in May 2021 and has experienced volatility since then. So far, the PetSmart news has only marginally boosted the blank-check stock.
PetSmart went private in 2015.
The reverse merger is an interesting strategy for PetSmart considering its long history on the stock market. The pet retailer first went public in 1993 before being bought out by private equity firm BC Partners in 2015, which privatized the company’s stock. BC bought PetSmart for $8.7 billion, which was one of the largest retail buyouts at the time.
The PetSmart SPAC deal could be worth $14 billion.
The SPAC deal between PetSmart and KKR could be worth a combined $14 billion, including debt. However, nothing is set in stone. The two entities are still in negotiations and the deal could dissolve as easily as it started.
What will happen to Chewy stock if PetSmart goes public?
After going public-to-private in 2015, PetSmart bought Chewy in 2017. At the time, PetSmart valued Chewy at $3.35 billion. In 2019, Chewy went public and its IPO nearly tripled that amount.
CHWY stock has experienced volatility over its two-and-a-half-year stock market history and has gained just 14.6 percent all time. By February 2021, the shares were up nearly 240 percent as people filled up their houses with pets during the COVID-19 pandemic.
Since the peak, CHWY stock has faltered, which brought the company’s market cap much closer to its IPO levels. Chewy cites mixed earnings and lower projections for 2022 as the reason for its wavering stock value and cautious shareholder outlook.
If PetSmart proceeds with the SPAC deal, CHWY stock could change course. Since PetSmart owns Chewy, it’s possible that PetSmart stock would absorb Chewy and buy out shareholders at a premium.
However, it’s also possible that PetSmart will let Chewy stock live on independently and keep the two stocks separate. More information about that will come if PetSmart and KKR decide to move forward with a merger agreement.