PetSmart wants to take Chewy.com, its wildly successful online venture, public at a valuation of $7 billion, according to a report by Bloomberg.
The company has recently had some trouble with PetSmart’s creditors and private equity investors after a portion of the Chewy unit was transferred to an unrestricted subsidiary and the other was moved to a parent company, out of the hands of debt holders.
Aiming to cash in on the success of Chewy.com, PetSmart has filed an amended registration form that sets a price range of between $17 and $19 for an IPO of 41.6 million shares. PetSmart could make $648 million by selling 36 million shares at the midpoint range, and Chewy would get $100.8 million by giving 5.6 million shares.
After all of the expenses are accounted for, Chewy would get somewhere around $90.3 million of net proceeds, which are already highlighted for working capital and various other corporate purposes.
BC Partners led a group of PetSmart’s private equity owners and creditors over the transfer of the business ahead of the IPO. They argued that PetSmart was not solvent at the time of the transfer and that it was invalid.
PetSmart tried to propose an amendment to loan documents to resolve the dispute. The retailer has a $4 billion loan due in 2022; it went up to 97.5 cents on the dollar after the amended filing, which was up from 96.25 at the end of May.
Chewy’s sales have been healthy. They rose from $204 million in 2014 to $3.5 billion in 2018. The company said 66 percent of its net sales came from subscriptions in 2018.
Documents show that even during times of financial insecurity, people spend money on their pets. During the recession of 2008 to 2010, overall spending went down, but pet spending went up by 12 percent.
“Spending on pets is a necessity, and most customers purchase frequently and in regular intervals,” the company said.