PetSmart and Chewy are splitting three years after their tie-up

This is the web version of Term Sheet, a daily newsletter on the biggest deals and dealmakers. Sign up to get it delivered free to your inbox.

In the typical retail horror story, Amazon lurks behind the door wielding the metaphorical chainsaw.

But in the case of pet goods in 2016, it was fast-growing, online-focused Chewy that bit into the revenue of market leader PetSmart. So PetSmart, backed by BC Partners, took on debt to acquire the newfangled threat for $3.3 billion in 2017—ostensibly to galvanize its own digital transformation.

But now, as both companies are getting a boost from avid pet lovers, BC Partners is splitting the duo up. The move will result in a lower debt-to-income ratio for PetSmart (as Chewy is unprofitable), with BC Partners planning to recapitalize PetSmart with $1.3 billion in equity. BC also plans to raise $4.7 billion or so in debt from investors for the 34-year-old chain. Shares of Chewy, meanwhile, will be transferred to a BC Partners-led group. Moody’s upgraded PetSmart’s credit rating this week on the news.

Sure, hindsight is 20/20, but signs of a potential split were littered through the past few years. Just read my colleague Phil Wahba’s excellent May feature on the battle for the pet market.

Despite the 2017 tie-up, the two businesses have remained separate aside from the cross-selling of some products, with some in the industry viewing the acquisition as “less of an e-commerce strategy and more of a financial-management tactic,” per the feature. By staying separate, Chewy was able to command a higher e-commerce valuation at its IPO rather than get bogged down by brick-and-mortar numbers. That IPO, in turn, helped PetSmart pay off some of its sizable debt load.

In strategy, too, the two have diverged. While e-commerce has been the buzzword of the last decade, market leader PetSmart was able to bring its sales decline to a “near-halt” last year by focusing on in-person services like veterinary care, doggy day care, and grooming, with just 4% of its sales coming from online (this year, sales have grown 5.5% so far). But Chewy has continued to lean into the e-commerce trend—beating even Amazon in sales of pet goods in 2019.

Meanwhile, competitor Petco, backed by CVC Capital Partners and the Canada Pension Plan Investment Board, is barking after a sale or public offering.

ANOTHER UNICORN BUST: Renrenche, a Chinese car trading website once valued at $1.4 billion with backers including Goldman Sachs and Tencent, is now in talks to sell major assets for a little over $1,000. Read more.

Lucinda Shen
Twitter: @shenlucinda
Email: lucinda.shen@fortune.com

VENTURE DEALS

- Yuanfudao, a Chinese tutoring platform, raised $2.2 billion in funding, valuing it at $15.5 billion. Tencent led the G1 round of funding round and was joined by investors including Boyu Capital, Hillhouse Capital and IDG Capital. DST Global led its G2 funding round and was joined by investors including GIC, CITICPE, Temasek, TBP, DCP, Ocean Link, Danhe Capital and Greenwoods.

- Eat Just, a San Francisco-based startup making plant-based eggs, is seeking to raise at least $200 million in a deal that could value it at over $2 billion, per Bloomberg. Eat Just investors include Khosla Ventures and Founders Fund. Read more.

- Applied Intuition, a Sunnyvale, Calif.-based maker of software for autonomous vehicle testing, raised $125 million in Series C funding. Investors include Lux Capital, Andreessen Horowitz, and General Catalyst.

- Sirnaomics, a company developing RNAi therapeutics, raised $105 million in Series D funding. Rotating Boulder Fund led the round and was joined by investors including Walvax Biotechnology and Sunshine Riverhead Capital.

- AavantiBio, a Cambridge, Mass.-based gene therapy company, raised $107 million in Series A funding. Investors include Perceptive Advisors, Bain Capital Life Sciences, and RA Capital Management.

- ACV Auctions, a Buffalo, N.Y.-based online auto marketplace, raised $55 million in funding. Durable Partners led the round. Read more.

- Allonnia, a Boston-based waste and wastewater treatment company, raised $40 million in Series A funding. Investors include Ginkgo Bioworks, Battelle, General Atlantic, Cascade Investment, and Viking Global Investors.

- Araris Biotech AG, a Zurich, Switzerland-based company pioneering antibody-drug conjugate (ADC)-linker technology, received an additional CHF 12.7 million ($14 million) in seed funding. Pureos Bioventures led the round and was joined by investors including 4BIO Capital, btov Partners, Redalpine, VI Partners and Schroder Adveq.

- Loyal, an Atlanta, Ga.-based A.I. conversation platform for health care providers, raised $12.5 million in Series A funding. Concord Health Partners led the round.

- TeleSense, a Sunnyvale, Calif.-based agricultural IoT startup, raised $10.2 million in Series B funding. Finistere Ventures led the round.

- Cohere Health, a Boston, Mass.-based digital health company, raised $10 million in funding. Flare Capital Partners and Define Ventures led the round.

- Lili, a New York City-based banking app for freelance workers, raised $15 million in funding. Group 11 led the round and was joined by investors including Foundation Capital, AltaIR Capital, Primary Venture Partners, Torch Capital, and Zeev Ventures.

- EveryoneSocial, a Salt Lake City-based employee-focused social platform, raised $7.6 million in Series A funding. Next Frontier Capital led the round and was joined by investors including Crane Group and Epic Ventures.

- Here.fm, a New York-based video chat room platform, raised $2.9 million in seed funding. FirstMark Capital led the round and was joined by investors including Y Combinator. Read more.

- Silverflow, an Amsterdam-based payment technology company, raised €2.6 million ($3.1 million) in seed funding. Crane Venture Partners led the round and was joined by investors including INKEF Capital.

- Render, a San Francisco-based dev-ops platform, raised $4.5 million in extended seed funding. General Catalyst led the round and was joined by investors including South Park Commons Fund, Lee Fixel, Elad Gil and GitHub CTO Jason Warner.

- OnSite Waste Technologies, a Newport Beach, Calif.-based company focused on the sterilization of medical waste, raised $3.5 million of Series A funding. Mark IV Capital led the round.

- Cobble, a New York-based decision-making app, raised $3 million in seed funding. Investors included Kerr Tech Investments. Read more.

- Ware, a San Francisco-based warehouse drone technology startup, raised $2.5 million in seed funding. UP Partners led the round and was joined by investors including Bloomberg Beta, and 2048 Ventures.

- PredictSpring, a San Francisco-based POS company, raised an undisclosed amount of funding from Salesforce Ventures.

PRIVATE EQUITY

- BC Partners plans to split PetSmart and Chewy, two pet goods retailers. It plans to recapitalize PetSmart with $1.3 billion, per Bloomberg. Read more.

- Syncapay, backed by Centerbridge and Bain, acquired the North American unit of Wirecard, the German payments firm. Read more.

- TIBCO Software, backed by Vista Equity Partners, agreed to acquire Information Builders, a data and analytics software company, per Reuters. Read more.

- Havencrest Capital Management acquired ThermoTek, a Flower Mound, Texas-based provider of temperature management solutions to the medical and industrial end markets. Financial terms weren't disclosed.

- Levine Leichtman Capital Partners acquired NMiCertin B.V., a Dutch metrology testing company, from First Dutch Innovations. Financial terms weren't disclosed.

- Oakley Capital agreed to acquire WindStar Medical, a German consumer healthcare company. Financial terms weren't disclosed.

- Achievers, backed by Silver Lake and P2 Capital, acquired TemboSocial, a Toronto-based employee feedback tool. Financial terms weren't disclosed.

- Finastra’s Filogix, backed by Vista Equity, acquired Doorr, a Toronto-based provider of point-of-sale mortgage software. Financial terms weren't disclosed.

EXITS

- PayPal Holdings is considering an acquisition of BitGo, a Palo Alto, Calif.-based crypto custodian, per Bloomberg. Craft Ventures, Pantera Capital, and others back Bitgo. Read more.

- Ares Management is considering a sale of Farrow & Ball, a U.K.-based paint maker, per Bloomberg. Read more.

- Symplr, backed by Clearlake Capital Group and SkyKnight Capital, agreed to acquire TractManager, a healthcare software platform, from Arsenal Capital Partners. Financial terms were not disclosed.

- Parcom Private Equity acquired a majority stake in Group of Butchers, a Netherlands-based supplier of artisanal specialty meat products, from Equistone Partners Europe. Financial terms weren't disclosed.

- Viagogo may have to sell all or part of StubHub, a ticketing platform, after the U.K.’s competition watchdog said the $4.05 billion acquisition could hurt consumers. Read more.

OTHER

- Flipkart plans to acquire a 7.8% stake in Aditya Birla Fashion, an Indian clothing retailer, for about $204 million. Read more.

- EQT Corp. is seeking to acquire CNX Resources Corp. (NYSE: CNX), a U.S. natural gas rival. Read more.

- Cognizant (NASDAQ: CTSH) agreed to acquire Bright Wolf, a technology services provider specializing in industrial internet of things solutions. Financial terms weren't disclosed.

- Wells Fargo & Co, the U.S. banking giant, is exploring a sale of its asset management business, per Reuters. Read more.

- Adidas is exploring a sale of Reebok, one of its sports brands, per Bloomberg.

IPO

- Lufax, the Chinese fintech lender, plans to raise $2.2 billion in an offering of 175 million ADSs priced between $11.50 to $13.50. Ping An Group backs the firm. Read more.

- Leslie’s, Inc. a U.S. pool and spa care company, plans to raise $600 million in an offering of 40 million shares (25% insider sold) priced between $14 to $16. BlackRock plans to buy $100 million worth of shares. L Catterton and GIC back the firm. Read more.

- Abcam, a U.K.-based maker of biological reagents, raised $157 million in an offering of 8.9 million ADSs priced at $17.50. T. Rowe Price Associates, Durable Capital Partners, and Aberdeen Asset Management back the firm. Read more.

SPAC

- CarLotz, a Richmond, Va.-based used-car selling platform, plans to go public via merger with Acamar Partners Acquisition Corp, a SPAC, valuing it at $827 million including debt.

- Altimar Acquisition, a SPAC formed by HPS Investment Partners, raised $250 million.

- Zanite Acquisition filed to raise up to $200 million.

- Churchill Capital Corp V, a blank check company formed by former Citi executive Michael Klein, now plans to raise $400 million, up 33% from its previous estimate.