PetSmart and Chewy. BC Partners'' bet that became one of PE''s greatest deals
A $9B 2014 take-private that became a $30B+ outcome through e-commerce
The deal. In December 2014, BC Partners led a consortium that took PetSmart private for $8.7 billion ($83/share). PetSmart was the largest U.S. Pet specialty retailer with 1,400+ stores. The capital structure was approximately 80% debt. The deal was made at near-peak retail valuations.
The thesis. PetSmart had market-leading position, services revenue (grooming, training, veterinary), and benefits from pet humanization trends. The original thesis was modest operational improvement and re-IPO at higher multiples. The transformative move came in 2017: BC Partners acquired Chewy.com, the rapidly-growing pet e-commerce company, for $3.4 billion.
What they did. The Chewy acquisition was contrarian. Buying a money-losing e-commerce startup with a brick-and-mortar retailer's balance sheet. Chewy had been growing 100%+ annually but was bleeding cash. BC Partners believed: (a) pet e-commerce was structurally winnable due to repeatable consumption patterns, (b) Chewy's subscription auto-ship model produced compounding LTV economics, and (c) the combined platform could pursue both physical and digital markets. They funded continued aggressive Chewy growth investment while running PetSmart for cash.
The outcome. Chewy IPO'd in June 2019 at a $9B market cap, then traded as high as $50B during the 2020-2021 pet-spending boom (current ~$10-15B). BC Partners and Apollo (the major subsequent investor) returned multiples of their original equity through Chewy alone. PetSmart's physical retail business produced additional cash distributions. The deal. Initially viewed skeptically. Became one of the best-returning consumer-retail PE outcomes of the 2010s.
Best practices for VantageOS users. First, contrarian thesis evolution mid-hold can produce extraordinary returns. BC Partners didn't buy PetSmart to acquire Chewy; that was a thesis evolution as the e-commerce shift became clearer. Stay open to fundamental thesis revision when the data supports it. Second, combining cash-generating physical assets with cash-burning growth assets (PetSmart funding Chewy) is a classic PE structure that's underutilized. The cash cow funds the disruptor while both benefit from shared consumer relationships. Third, subscription business models (Chewy auto-ship) produce compounding returns that traditional retail doesn't capture; underwrite subscription LTV explicitly when evaluating consumer businesses.