Investment

US family office looks set for big payout with highly expectant IPO

Longview Asset Management, the investment arm of Henry Crown & Co, a Chicago-based family office, could get a hefty return with the imminent initial public offering of online pet care retailer Chewy.

Longview owns with several other investors PetSmart, a US-based pet care retailer and holding group, which is Chewy’s majority owner.

Some analysts reckon Chewy could have a market valuation of between $22-28 billion at its IPO

Founded in 2011 in Florida, Chewy had annual revenues of $3.6 billion in its fiscal 2018. Beyond Meat, which listed in early May, had revenues of just under $90 million, but the plant-based meat substitute company’s stock market debut became one of the best performing first-day IPO in nearly 20 years, closing the first day on NASDAQ at 164% above its IPO price.

Due to its dual-class shareholding structure, Chewy won’t list on the S&P 500, but most other indicators suggest the IPO is likely to be heavily over-subscribed to by investors.

Chewy is also well-positioned in one of the fastest-growing parts of the retail e-commerce world – in the so-called “pet humanization” sector. This is the trend whereby more pet owners are wanting to provide their pets with human-like products or experiences – and spending a lot of money doing so.

Longview together with private equity groups BC Partners, StepStone Group, and the Candian pension fund Caisse de dépôt et placement du Québec bought PetSmart in 2015 for $8.7 billion. PetSmart then went on to acquire Chewy in 2017, which at the time was the biggest e-commerce acquisition ever, worth $3.5 billion. But that looks like a good deal for the buyers given some analysts reckon Chewy could have a market valuation of between $22-28 billion at its IPO.

During the venture investment rounds of pre-listed Chewy, the Belgium-based Verlinvest, the family investment group for the Spoelberch and de Mévius families, took a stake in the pet care group. Verlinvest paid $75 million for an undisclosed holding in a Series D round for Chewy in 2015.

Verlinvest then went on to sell its stake in 2017 when PetSmart acquired Chewy. The Belgian investor is likely to have made a substantial return from its investment, although given the positive noises around Chewy’s IPO Verlinvest might be regretting it didn’t hold onto its shares longer.  

Longview’s pet care investors have been driven by what appears to be its appropriately named CEO and chair of its investment committee, James Star. Chicago-based Star has been with Longview since 1994, and, according to SEC filings, Star will assume the role of chairman of Longview, stepping down from his other roles later this year. He’s likely to be well rewarded for his savvy investment decisions in the pet care market.

Henry Crown & Co was set up as the investment office of industrialists Henry Crown in 1959, making it one of the oldest family offices in the world. Crown made his fortune by setting up the industrial group Material Service Corporation, which merged with General Dynamics in 1959 and led to Crown owning a majority stake for a time in the huge American conglomerate.

Henry Crown & Co now manages the money of the second, third and fourth generation of the Crown family. James Crown, Henry Crown’s grandson, is the current president of the Chicago-based investment group, which has a staff of more than 30 professionals.

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