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H&F, EQT Team Up on $4.3 Billion Zooplus Bid, Ending Battle

H&F, EQT Team Up on $4.3 Billion Zooplus Bid, Ending Battle

Hellman & Friedman and EQT AB teamed up on a joint 3.7 billion euro ($4.3 billion) offer for Zooplus AG, ending a takeover battle between the private equity companies that drove up the price for the German online pet-food retailer.

Hellman & Friedman said it raised its offer to 480 euros a share in cash from 470 euros, and EQT will be an equal partner in the bid, continuing a growing trend for private equity funds to cooperate rather than trying to outbid each other.

The bid is 85% higher than the average share price in the three months before the first interest emerged in August. Several rounds of bidding between the firms pushed up the price, potentially making it harder to squeeze out returns on the investment. Zooplus Chief Executive Officer Cornelius Patt called the premium “remarkable.”

Zooplus is the latest example of private equity companies joining forces after clamoring for the same target. Competition for deals is getting tighter as firms, flush with record amounts of cash, go on a spending spree. They have announced deals valued at $244 billion targeting companies in Europe this year, according to data compiled by Bloomberg. That’s more than double the amount in the same period a year ago and already the highest annual total on record.

KKR & Co. also had held preliminary talks for Zooplus.

By clubbing together, PE funds can pool resources to take on ever more ambitious targets. In June, Blackstone, Carlyle, Hellman & Friedman and Singapore’s GIC Pte took a majority stake in Medline Industries Inc. in a deal worth more than $30 billion.

Earlier this summer, Fortress Investment Group teamed up with the Canada Pension Plan Investment Board, one of the world’s largest investors in private equity, to make an offer for Wm Morrison Supermarkets Plc. Apollo Global Management also mulled joining the Fortress consortium which ultimately lost out to U.S. private equity firm Clayton Dubilier & Rice LLC in an auction.

The stock rose 0.7% to 478.60 euros at 11:11 a.m. in Frankfurt.

Zooplus’s management and supervisory boards support the bid and recommend shareholders accept it before it expires on Nov. 3. The final price is 23% higher than the first offer Zooplus got, which was from Hellman & Friedman. 

The pet-care market has boomed in the last two years as stay-at-home workers adopt furry friends, according to figures from Euromonitor. The data firm predicts 7% growth in the global pet-care market through 2026 as online transactions boost sales. Demand was strong even before Covid-19 as owners increasingly bought more premium products and turned to convenient online deliveries. 

Hellman & Friedman, led by Patrick Healy, raised one of the biggest-ever buyout funds with $24.4 billion in July. Alternative asset manager EQT has become one of the most-active European private-equity houses working on some of the biggest buyouts on the continent in recent years including Nestle Skin Health. 

Low rates and high returns have prompted limited partners -- pension funds, insurers -- to allocate more money to private equity in search of yield, spurring the most buyout-led acquisitions in Europe in the first half of the year in over a decade.  

EQT has done deals in the pet industry before, building up a chain of veterinary care practices under the IVC Evidensia moniker. 
 

©2021 Bloomberg L.P.