Rumors Aside, Petco Should Purr to a Close

The $600 million buyout of Petco Animal Supplies Inc. was in the doghouse early in the week in the eyes of the Street. By week’s end, though, checks on the deal put a leash on speculation that it might be in trouble. This past Monday, Sept. 11, on heavy volume and swirling rumors about the financing, Petco’s stock dipped to as low as $17.88, or 18% south of the $22-per-share transaction. Petco stock rebounded during the rest of last week, closing at $20.13 at press time. But that level still conferred a 340% annualized rate of return if the deal closes, for example, on Sept. 27, the day of the shareholder vote. An end-of-September close would yield a 261.6% annualized rate of return. And if the close goes out to, say, Oct. 6, that figure would still be an impressive 179%.