KKR halves Pets at Home stake and eyes Tesco

Kasmira Jefford
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KKR was not horsing around yesterday as it slashed its Pets at Home stake to 25.2 per cent
PRIVATE equity giant KKR has nearly halved its stake in Pets at Home just as it emerged yesterday that the firm has been invited to bid for Tesco’s South Korean business.

US-based KKR bought Pets at Home from private equity rival Bridgepoint in 2010 for £995m. The pet care and products retailer floated on the London market in March last year at 245p a share, valuing it at £1.2bn.

In a regulatory announcement yesterday, KKR said it was placing 108m shares at 267p each, leaving it with a 25.2 per cent stake. It previously held 46.8 per cent of Pets at Home.

The shares were being offered by way of an accelerated bookbuild, with Bank of America Merrill Lynch acting as bookrunner.

Shares in the FTSE 250 retailer, which posted its full-year results earlier this week, fell 2.56 per cent to 273.8p last night.

“Supporters of Pets may have felt their hearts sink when the news came out after the close last night that the private equity fund KKR wants to dump nearly half its holding,” retail analyst Nick Bubb said. “Despite the decent reception to last week’s final results from Pets, a hefty discount will be required to shift that stock.”

News of the placing came just as reports emerged that KKR may have another retailer in its sites. Supermarket chain Tesco has invited at least six firms including KKR and Carlyle Group to bid for its South Korean unit Homeplus, valued at about $6bn (£3.9bn), people familiar with the deal said yesterday.

A sale will help Tesco cut its debt-pile and fund a turnaround plan as it battles to recover from an accounting scandal and stem the decline in market share at home to discounters Aldi and Lidl.

Homeplus is expected to appeal mainly to private equity firms, which are likely to look at making money from the retail giant’s valuable property assets through sale-and-leaseback agreements. Apart from online sales, the unit’s growth opportunities are viewed as limited in a mature market.

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