After an after-tax profit fall of 51% in a single year, Greencross/Petbarn/CityFarmers shareholders will likely vote to accept a takeover offer from private equity firm TPG (Not the telecommunications company, but a US investor) when they vote early next year. The takeover offer is nearly $100M LESS than a similar offer made by the same company the year before.

Here’s what it means to the pet industry in Australia.

Blaming a difficult retail market and increased competition in the veterinary practice sector by Vet Partners, and “a slow economy seeing people making fewer trips to pet shops and vets”, the realities are these:

• there are 8 pet shop chains in Australia, in a retail space meant for far fewer large players
• the corporatisation of veterinary practice has tended to mean less “personal passion” from veterinarians who are now employees but used to be owners.
• many clients have “voted with their feet” by rejecting “corporate” practices in favour of friendlier models
• staff training has been a difficult issue for some retail chains

“Shopping on the internet” has clearly made an impression, but still represents only 6% of retail turnover.

What does this mean for pet businesses in Australia?

• private equity firms are very focused on cutting costs and driving profits. Expect lower stock holdings, pressure to sell products/services and changes to staff numbers. If you are a supplier, don’t let your debtors get out of hand.
• other retail chains may be forced to respond. Look for bargains
• make sure your staff: client experience is truly great. This may be the difference between survival and business death.
• expect some Petbarn/CityFarmers stores and even some Greencross vets to close (we are advised that some Greencross vets are already closing). This may mean bargains for consumers, which can negatively impact your turnover in the short term.

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