Cognetas uncages Arcaplanet for EUR46m

Cognetas is to acquire Italian pet accessories and food store Arcaplanet for around €46m – a price representing around 9.5 times Ebitda – from Milan-listed bank Credito Emiliano. Credem Venture Capital will remain a minority shareholder.The deal is Cognetas’s first in more than two years and has been funded entirely with equity. “We have been interested in pet retailing for some time and started looking at this deal in the spring,” said Cognetas’s Nigel McConnell. “We have invested in pet food maker Diana Ingredients, so we have seen how remarkably resilient the pet industry is in a downturn.”Arca employs 230 people and runs a store format allowing it to provide a competitively priced range of 6,000 products, from pet food to accessories. This compares to a sector where the overall market is dominated by about 4,500 small, family-run stores. Despite this fragmentation, the market has registered a compound annual growth rate of five per cent. The company has grown revenue by more than 14 per cent annually.Cognetas has bold plans to expand Genoa-based Arca’s current store network from 45 stores to more than 90 in the next three years.“Pet stores in Italy are predominantly small ‘mom and pop’ shops. A company that has the wherewithal to get its distribution right and can lead consolidation is in a very exciting position,” said McConnell. The firm also has long-term plans to develop stores in out-of-town retail parks and to introduce private-label goods.“People do not switch the animal food they use easily. There is a lot of stickiness and it is a repeat purchase, so there is a big opportunity for the business to sell private-label products in its stores, which it doesn’t do at the moment,” McConnell said. Pet-related businesses have become a private equity favourite. KKR’s buyout of Pets at Home in the UK at the start of the year is one of the largest deals in 2010. TPG owns Petco in the US and Permira owns Dutch pet food maker Provimi.McConnell said the industry’s defensive characteristics make it an attractive area for private equity investment: “People do humanise their pets. A pet becomes a part of the family, so any spending on pets is not discretionary,” he said. “You would be surprised to see how much customers are prepared to spend on their pets.”Arca will continue to be led by Michele Foppiani, the founder of the company, who will remain chief executive. Marco Jesi, a Cognetas operating partner and previously the president of PepsiCo Europe, will become chairman.Cognetas came up against two other private equity firms in the auction of Arca – one of them Italian and one a pan-European outfit. McConnell said having a local office and teaming up with Jesi gave it the edge to win the deal.Cognetas has had a difficult credit crunch, losing control of portfolio companies Covenant Healthcare, a plastic surgery business; pub group Novus; Travelsphere, a holiday provider; glass manufacturer SGD; and printer CPI to lenders.The firm still has a year left to invest the remaining €300m from the €1.26bn buyout fund it raised in 2005, however. It is lining up a series of companies for exits, including OASE, a garden ponds and fountains equipment group; advertising agency Commarco; and KSM Castings, an aluminium parts supplier to the automotive industry.


To view the deal details,  or subscribe.

Previous articleHub hubris
Next articleOctopus appoints Andrews