Will Brazilian pet retailer Petz merge with competitor Cobasi?

Petz has entered a non-binding memorandum of understanding (MoU) for a possible merger with rival Cobasi. 

The pet retailer says the deal involves the merging of 2 companies with “similar business models” and “strategic directions.” The new entity would not only scale but “strengthen” the omnichannel commercial strategy.

If the companies decide to merge, the combined entity will have a network of 483 stores, including the 246 locations that Petz has across 23 states. It is believed that it will also achieve a gross revenue of approximately BRL 6.9 billion ($1.3B/€1.2B). 

Petz Group posted a gross revenue of R$3.8 billion ($760M/€700M) in 2023, a 12.5% increase.

Direct negotiation

As part of the agreement, both companies will negotiate exclusively with each other without involving any third parties. 

The MoU states that once the deal is closed, the company stock will be equally divided between Petz and Cobasi, with each receiving a 50% stake, and BRL 450 million ($86.9M/€81.5M) to be distributed to Petz shareholders in cash, subject to adjustments. 

The deal is subject to negotiation and due diligence by both parties and the compliance of certain conditions, including approval by the Brazilian Antitrust Authority (CADE). 

High potential?

According to analysts at JP Morgan led by Joseph Giordano, the deal has a “high synergy potential even in the context of its execution risks and challenges as seen in other mergers in the industry.” 

Giordano adds that they expect the combined business to take up between 15% to 20% of the market share in the country. 

Following the announcement, Petz’s stock rose as high as 47% on 19 April 2024.