Petz Shares Jump as Merger with Cobasi Nears Approval

Petz (PETZ3) shares jumped 4.68% to R$4.25 on Monday, January 13, 2025. The surge came after O Globo reported the merger with Cobasi could gain approval in Q1 2025.

This news excited investors who had been waiting for updates since the deal’s announcement in August 2024. The proposed merger would create Brazil’s largest pet retail company.

The combined entity would operate 494 stores across 140 cities. It would generate annual revenue of R$6.9 billion and EBITDA of R$464 million. These figures highlight the significant scale of the new company.

JPMorgan analysts had predicted a positive market reaction to the merger news. They were proven correct as Petz shares led gains on the Ibovespa index. The bank maintains a neutral rating on Petz stock with a R$5.25 price target.

The merger agreement gives Petz shareholders a 52.6% stake in the new company. Cobasi shareholders will own the remaining 47.4%. Petz shareholders will also receive R$400 million in cash payments.

Petz Shares Jump as Merger with Cobasi Nears Approval. (Photo Internet reproduction)

However, this includes R$130 million in pre-merger dividends. Sergio Zimerman, Petz’s founder, will serve as chairman of the merged company. Paulo Nassar from Cobasi will take on the CEO role.

Merger Reshapes Brazil’s Booming Pet Retail Market

This leadership structure aims to blend the strengths of both organizations. The pet retail market in Brazil continues to grow rapidly. It generated over R$60 billion in revenue in 2022.

The merger positions the new company to capture a larger share of this expanding market. However, the deal still faces some hurdles. Regulatory approval from CADE, Brazil’s antitrust watchdog, is pending.

Some analysts speculate that store closures or sales may be required for approval. The merger also aims to create significant synergies. Annual EBITDA is expected to increase by R$220-330 million.

In addition, these gains will come from various operational improvements and efficiencies. Despite the positive news, challenges remain for the pet retail sector. Competition from online marketplaces is intensifying.

The merged company will need to leverage its scale to compete effectively in the evolving market. As the pet care industry in Brazil continues to grow, this merger represents a significant consolidation. It reflects the ongoing trends of market expansion and increased competition in the sector.