Second investor pushes for PetSmart to sell itself

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By Jayson Chesler By Jayson Chesler

NEW YORK (AP) -- A second PetSmart investor is pushing the pet food retailer to sell itself.

Investment firm Longview Asset Management disclosed in a filing with the Securities and Exchange that it has a 9 percent stake in PetSmart and said the company needs to consider a sale to increase shareholder value.

"Our research suggests that PetSmart is likely to be valued much more highly by private market participants than by its current public market investors," Longview CEO James Star said in a letter to PetSmart's board.

On Thursday, activist hedge fund Jana Partners reported a 9.9 percent stake in PetSmart and said it wants the company to consider selling itself or improve its performance. Since then, PetSmart's shares rose more than 13 percent from its closing price of $59.81 Wednesday.

Star said in his letter that fending off the campaigns by Jana and Longview will distract PetSmart's employees and "erode business value." Star said he has talked to PetSmart's management about his concerns.

PetSmart did not immediately respond to a request for comment Monday.

But the company said in a separate government filing early Monday that its board is considering possibly returning more money to its shareholders. But it added that there was no guarantee that any changes will be made. Companies typically increase shareholder value by buying back stock or issuing dividends. PetSmart did not specify what it plans to do.

Phoenix-based PetSmart reported disappointing revenue in the first quarter due to increasing competition and lower consumer spending. To boost sales, PetSmart has been adding more pet grooming services and fresh pet food. The Phoenix-based company has more than more than 1,340 stores around the country.

It shares rose $1.33, or 2 percent, to $68.61 in afternoon trading Monday. Its shares are still down nearly 6 percent since the beginning of the year.

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