The shares of PetSmart, Inc. (NASDAQ:PETM) surged more than 12% after Jana Partners, the activist fund headed by Barry Rosenstein disclosed a 9.9% stake in the pet-supply retailer based on its regulatory filing with the Securities and Exchange Commission (SEC).
In the regulatory filing, activist hedge fund stated its belief that the shares of PetSmart, Inc. (NASDAQ:PETM) are “undervalued and represent an attractive investment opportunity.”
Jana Partners also indicated its intention to seek discussions with the board of directors and management of the pet-supply retailer to review strategic alternatives including a potential sale, improving operating performance and capital structure.
The activist hedge fund also wants to discuss a significant return of capital to shareholders, improving the capital allocation policy of PetSmart, Inc. (NASDAQ:PETM) and disclosure to shareholders as well as the composition of its board and management.
In addition, Jana Partners also stated that it may take other steps to increase shareholder value including acquiring a control stake in PetSmart, Inc. (NASDAQ:PETM), engaging in extraordinary transactions such as merger, and seeking to exert negative control over important corporate actions.
In response to the regulatory filing of Jana Partners, the board and management of PetSmart, Inc. (NASDAQ:PETM) said the company “welcomes open communications with its shareholders and values constructive input toward the goal of enhancing shareholder value.”
The pet-supply retailer emphasized that its board and management team are committed to creating value for its shareholders, and will continue to take actions to accomplish that goal and to position the company towards growth and success.
Jana Partners took a similar position on several companies including Outerwall Inc (NASDAQ:OUTR), the parent company of Redbox video rental kiosk. The activist hedge fund acquired 13.5% stake in Outerwall in October, last year.
The activist hedge fund invested in the pet-supply retailer amid intense competition and lackluster sales. PetSmart, Inc. (NASDAQ:PETM) reported earnings of $1.04 per share on $1.7 billion in revenue. The company’s revenue for the quarter missed the $1.8 billion in revenue consensus estimate of Wall Street analysts.
During its quarterly conference call in May, PetSmart CEO David Lenhardt expressed confidence that the company has the right long-terms strategies, but he emphasized they have work to do such as driving traffic in stores and delivering top line sales growth.