Report: Leading pet retailers may merge

The two biggest specialty pet retailers in the U.S. may merge. According to Reuters, Petco Holdings is considering a possible acquisition from chief rival PetSmart.

Both companies, which together account for about 30% of all specialty pet stores and more than 50% of specialty pet revenue in the U.S., are owned by private equity groups. Phoenix-based PetSmart, owned by a consortium led by B.C. Partners Ltd., generated $7.1 billion in net sales in fiscal 2015. San Diego-based Petco, owned by TPG Capital LP and Leonard Green & Partners L, generated about $4 billion in net sales.

In August, Petco registered for an IPO that could be worth $5 billion to $6 billion, including debt. A sale to PetSmart or another entity would replace the IPO as a means of raising capital for its owners. Petco has begun informal talks with PetSmart but not yet shared confidential information, and is also reportedly discussing a possible acquisition with suitors including Apollo Global Management LLC and Bain Capital LLC.

TPG and Leonard Green bought Petco for $1.7 billion in 2006. B.C. Partners and other private equity firms bought PetSmart for $8.7 billion in December 2014.