Blackstone has put forward $2.3 billion for the Rover Group.
Shares of Rover Group, the online marketplace for pet care, soared 29% after receiving a takeover bid from financial investor Blackstone. This brought the stock’s year-to-date gains to a staggering 170%. The offer from Blackstone is worth 11 dollars in cash per Rover Group Class A share, representing a 30% premium to the closing price of the stock. Based on the 90-day volume weighted average price ending November 28th, 2023, the premium is even 61%. This values Rover at 2.3 billion dollars.
Rover Group specializes in pet care and operates an online marketplace that connects pet owners with local pet sitters. Services include pet boarding, pet sitting, daycare for dogs, dog walking, in-home visits, and grooming. The company builds a platform and mobile app that allows pet owners to easily find, book, pay, and review loving pet care providers while removing many of the headaches of pet ownership.
In the past fiscal year, the company saw revenues of 174 million dollars, representing a 58% growth. The bottom line was a loss of 22 million dollars. Blackstone’s takeover provides the company with a substantial influx of capital, as well as the know-how and resources of one of the leading private equity companies in the world. It is expected that the acquisition will provide Rover with the necessary support to expand its services, invest in technological advancements, and expand into new markets.
The merger agreement includes a customary 30-day “go-shop” period that ends December 29th, 2023. During this period, Rover can solicit and consider alternative acquisition offers from third parties. The closing of the transaction is expected to take place in the first quarter of 2024.
Rover has shown high growth dynamics. In the recently ended third quarter, revenues rose 30% to 66.2 million dollars, with 1.8 million bookings taking place on the platform, a 20% increase compared to Q3 of 2022. The adjusted earnings before interest, taxes, and amortization (EBITDA) was 17 million dollars. A profit of 10.5 million dollars was realized.
For the full year, CEO Aaron Easterly is targeting total revenues of 230-232 million dollars, and an adjusted EBITDA of 46-48 million dollars. The potential of the market is large, with 87 million households in the US, 64 million in Europe, and 9 million in Canada owning pets. Surveys show that 96% of dog owners and 95% of cat owners treat their pets as family members and are willing to invest significant amounts in them. 83% of bookings in 2022 were from existing customers.
The 95 billion dollar US pet market holds a market size of 9 billion dollars in pet overnight care alone, likely accounting for the premium paid by Blackstone, which is about 10 times the expected revenue for 2023 and 48 times the expected adjusted EBITDA.