Pet City founder to buy back superstore chain back

THE MANAGEMENT team that sold the Pet City chain of superstores to the US group PetsMart for pounds 150m little more than two years ago is understood to be negotiating to buy the chain back for a knock-down pounds 15m.

The management of PetsMart UK is led by chief executive Giles Clarke, one of the co- founders of Pet City who made a profit of pounds 20m on the sale in October 1996 and who also helped set up the Majestic Wine Warehouse business.

He is thought to be unhappy about a proposal to sell the UK chain to its main British rival, Pets at Home, for a reported pounds 10m. Some experts feel a merger may run into competition problems as the combined group's share of certain sectors of the pet market would be near monopoly levels. Mr Clarke is thought to be in talks with venture capital backers and a deal could be announced by the weekend.

PetsMart UK, which changed its name from Pet City following the US takeover, declined to comment on a possible management buy-out yesterday. Cheshire- based Pets At Home also declined to comment.

The sale of the UK PetsMart chain for such a knock-down price would represent a spectacular failure by the US group.

When it acquired the business in October 1996 it had plans to expand the business from 50 stores to over 300 and become a category killer like Toys R Us.

"Pet retailing is one of the growth businesses of the 1990s," PetsMart chief executive Mark Hansen said at the time.

Before the deal the UK business had captured pet lovers' attention by offering a wide range of pets including tarantulas, chipmunks and parakeets as well as hamsters and budgies.

But since then it has added just eight new UK stores and appears to be struggling. Store rents rose, competition became tougher and planning permission for new stores has been difficult.

In the US PetsMart shares collapsed not long after the Pet City takeover when it issued a profits warning blaming stock mistakes and "slower sales of flea and tick products".

The company is now looking to exit the UK market. This would represent a reversal of the oft-quoted retail maxim that British retailers often struggle when they expand in the US.