Will $8.7 billion sale of PetSmart change policies on parrots & pit bulls?

Only corporate knows for sure

PHOENIX, Arizona––What will the December 14, 2014 sale of PetSmart mean to PetSmart Charities, the $51-million-a-year PetSmart nonprofit arm that funds more spay/neuter surgery and adoptions than any other organization?

The short answer is, none of the 54,000 PetSmart employees know yet just what the sale means, including PetSmart Charities executive director Jan Wilkins, program manager Bryan Kortis, and director of grants and field initiatives Julie White.

The impact, however, could be significant. Seven of the 11 members of the PetSmart Charities board of directors are associated either with the PetSmart company or with investment funds holding an ownership stake in the PetSmart retail chain of more than 1,300 stores in the U.S., Canada, and Puerto Rico.

Leadership changes ahead?

Since PetSmart Charities is separately incorporated, the PetSmart sale does not necessarily mean a transition of PetSmart Charities leadership––though probably it will.

Usually leadership changes at for-profit companies are closely followed by parallel changes in the boards of directors of any charities for which the companies are the major funders. Rarely does the board of a nonprofit funded largely through a single for-profit organization rebel and take a separate direction, at cost of the funding relationship.

PetSmart founders Jim and Janice Dougherty formed PetSmart Charities in 1995, nine years after they started the PetSmart store chain and began donating retail space to animal shelters and rescue groups to rehome dogs and cats. Initially PetSmart Charities just managed the PetSmart Charities Adoption Centers. Soon, however, PetSmart cashiers began encouraging customers to add a dollar or more to their orders to fund PetSmart Charities projects, including disaster relief, spay/neuter projects, and other grants to animal shelters and rescues.

Projects

Currently PetSmart Charities helps to facilitate about 400,000 dog and cat adoptions per year, and about 285,000 spay/neuter surgeries, along with making about $34 million a year in grants to approximately 2,800 other animal charities.

The largest project funded by PetSmart Charities in recent years may be Pets for Life, providing veterinary care and services to underserved neighborhoods in Atlanta, Chicago, Los Angeles, and Philadelphia since 2011, under management by the Humane Society of the U.S.

Having invested about $1 million a year in Pets for Life in 2013 and 2014, PetSmart Charities recently agreed to expand the program to five more cities in 2015.

Profitability

The most immediately obvious aspects of the PetSmart sale are that it was motivated by the chance for the investors to make more money, making more money is usually accomplished by increasing profitability, and increasing profitability often means finding ways to do less for more, including doing less charitable work that does not demonstrably bring in customers.

Also evident is that none of the major corporate players in the PetSmart sale have backgrounds in animal charity, though some of their individual executives might.

Partners in purchase

The purchasers include the investment firms BC Partners, StepStone, and a La Caisse, a Canadian specialist in pension fund management.

Reported Michael J. de la Merced of The New York Times,  “PetSmart agreed to sell itself for about $8.7 billion, months after the retailer came under pressure from two hedge funds. The retailer disclosed in August that it was exploring a sale after Jana Partners emerged as a major shareholder. The pet supply company had already been weighing its strategic options as its sales had begun to slow. A months-long auction of PetSmart eventually drew the interest of some of the biggest private equity firms. Ultimately, BC Partners, a European-American firm with about $15 billion under management, emerged as the winner.”

Added Bernard Condon of Associated Press, “The Phoenix-based pet store retailer says the investors have agreed to pay $83 per share in cash to the company. That’s a 39% increase from its closing price July 2, before the company announced it was looking to sell. The price is also a 7% increase from PetSmart’s closing price on December 12.

“The sale requires approval from PetSmart shareholders,” Condon continued. “LongView Asset Management says it will vote in favour of the deal. That fund owns 9% of PetSmart and had been pressuring the company to sell since the summer.”

“Humanization of pets”

Commented Drew Harwell of the Washington Post, “PetSmart has struggled lately as sales of pet stuff has shifted to the bigger, savvier web storefronts of Target and Amazon.com. The company’s true strength,” Harwell assessed, quoting PetSmart president David K. Lenhardt, has been not in sales volume, but in boosting expenditure per customer, by “convincing pet parents to ‘trade up’ from cheap bulk food to pricier organic, grain-free or premium blends, served fresh, frozen or raw.”

Said Lenhardt, “We see the continued humanization of pets, people treating their pets like family. We continue to feel very good about our ability to trade customers up.”

Liabilities associated with animals

The new PetSmart ownership may take a closer look at the liabilities associated with selling animals,  allowing customers to bring dogs into the stores,  and working with small charities and individual rescuers to rehome animals.

Outbreaks of the avian disease psittacosis have been an ongoing concern for PetSmart at least since September 2006, when Amanda de la Garza of Corpus Christi allegedly bought an infected cockatiel from a PetSmart store. Her father Joe de la Garza, 63, died from psittacosis sixteen days later; Amanda de la Garza was hospitalized for six weeks, spending some of that time in a coma. The de la Garza family filed a wrongful death lawsuit against PetSmart in June 2008.

Meanwhile, responding to an apparently unrelated psittacosis outbreak discovered in December 2007, PetSmart had by February 2008 suspended bird sales at 950 stores in 47 states.

Psittacosis recurred at a PetSmart store in Odessa, Texas, in June 2014. Parakeet sales were suspended at 511 stories before that outbreak was deemed fully controlled.

Pit bull policies

The biggest potential source of animal-related liability to PetSmart, however, may result from customers’ dogs.

PetSmart requires dogs to be leashed, and tries to discourage customers from bringing aggressive dogs into stores.

In addition, since 2007, “PetSmart’s policy is to not allow Bully breeds, or any mix of, or any pets that exhibit aggressive behaviors to participate in our Doggie Day Camp off-leash group play activities,” according to the PetSmart public relations web site. The policy pertains to “Pit Bull Terriers, American Pit Bull Terriers, American Staffordshire Terriers, Staffordshire Terriers, American Bulldogs, or mixed breeds that have the appearance or characteristics of one of these breeds.”

Adds the PetSmart policy statement, “Bully breeds are welcome in our grooming salons, training areas, PetsHotels, and stores in general.”

Stabbing incident

This has led to frequent in-store incidents. On November 13, 2014 for instance, the Coweta County Grandy Jury refused to indict PetSmart customer Craig Emory Haynes of Newnan, Georgia, for stabbing a pit bull who on August 11, 2014 attacked his dog on PetSmart premises.

Recounted Sarah Fay Campbell of the Newnan Times-Herald, “Hayes and his 11-year-old terrier Lexie were at the Banfield Animal Hospital inside PetSmart. A pit bull mix named Clara, who was there for a Newnan-Coweta Humane Society adoption event, escaped from her handler and ran up to Lexie, biting her on the ear. Hayes called for help and tried to separate the dogs, and when he was unsuccessful, began stabbing Clara.”

Clara was euthanized afterward by the Newnan-Coweta Humane Society, due to the combination of her previous attack history––she had attacked other dogs at least twice before––with the severity of her injuries.

Eight attacks in eight years

The Coweta County pit bull attack was at least the eighth at a PetSmart store in as many years to make headlines. Five of the pit bull attacks in PetSmart stores resulted in the deaths of other customers’ dogs; three resulted in human injuries.

In one case, in Gainesville, Georgia in February 2013, a PetSmart customer’s pit bull mauled a six-year-old inside the store. The customer and his companion then fled the store. Witness James Weber tried to stand in front of their vehicle to prevent their escape.

“They were entering their vehicle. The passenger pointed a gun through the windshield at me and told me to get out of the way. The driver actually tried to run me down in the parking lot to get away,” Weber told Tom Regan of Channel 2 Action News.

Adoption risk

PetSmart Charities Adoption Centers are another source of potential corporate liability for dog attacks and issues pertaining to animal health.

Brynn Grimley of the Tacoma News Tribune on December 13, 2014 spotlighted the possible risks in examining the case of just one of the tens of thousands of individual animal rescuers who rehome animals through PetSmart stores––and spotlighted, as well, an alleged lack of PetSmart scrutiny of adoption partners.

“Three dogs that attacked and killed other animals last summer were all placed from the Lakewood (Washington) PetSmart,” all by Diana Van Dusen of P.U.R.R.R. Rescue, reported Grimley.

“In good standing”

While Van Dusen was later excluded from rehoming dogs through the Lakewood store, Grimley continued, “Van Dusen continues to adopt out animals at the PetSmart store in Lacey. In fact, she could continue to distribute them at the Lakewood store if not for lack of a city business license. As far as PetSmart Charities is concerned, Van Dusen is a reputable animal rescuer. Tia McCracken, PetSmart Charities western region adoption program manager, said Van Dusen ‘is in good standing with our adoption partnership,’” even though she has a long history of infractions of animal control ordinances.

“The city first learned of P.U.R.R.R. Rescue in 2008,” Grimley wrote, “when it discovered Van Dusen had converted the back of her house to accommodate 22 cats, more than the city’s allowed five licensed animals in a residential area. The city gave her time to find homes for the animals. Over the years, Lakewood animal control returned to her home for barking complaints, reports of aggressive dogs, and dogs breaking through a fence. She has been cited for having too many animals on her property and for failure to license animals, according to animal control reports.”

Van Dusen was sued on August 29, 2014, Grimley continued, for $7,900 in boarding fees allegedly owed to the Peninsula Pet Lodge of Olalla, Washington. The Peninsula Pet Lodge housed 13 pit bulls and a German shepherd mix earlier in the year. The plaintiffs contend that “All showed signs of neglect, were emaciated, malnourished and in need of flea and worm medication,” Grimley summarized, while “Van Dusen disputes the health complaints, but acknowledges the dogs needed baths.”

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