PetSmart Shares Surge After Jana Partners Reveal 9.9% Stake

(RTTNews) - Hedge fund Jana Partners LLC Thursday revealed a 9.9 percent stake in PetSmart Inc. (PETM) and said it plans to hold discussions with the pet products retailer's board about alternative options, including a possible sale. Shares of PetSmart surged 12 percent following the news.

Activist investor Jana, in an SEC filing, said it believes the shares of PetSmart are undervalued and represent an attractive investment opportunity.

The fund reported that it has purchased 9.8 million shares or about 9.9 percent stake at about $341 million.

Jana said it intends to have discussions with PetSmart's board and management regarding a review of strategic alternatives, improving operating performance, improving shareholder returns and management and board composition.

PetSmart has been able to report favorable results for the past few quarters despite uncertain economic conditions, as consumers continue to shop products required for their pets. Meanwhile, in May, PetSmart cut its full-year 2014 outlook, in light of a challenging and volatile consumer environment and a competitive market.

Phoenix, Arizona-based PetSmart operates more than 1,340 pet stores in the US, Canada and Puerto Rico and 200 in-store dog and cat boarding facilities and is online provider of pet supplies and pet care information.

PETM is currently trading at $67.04, up $7.24 or 12.10%, on a volume of 12.3 million shares, above the three-month average volume, on the Nasdaq.