When Barry Rosenstein's Jana Partners revealed a 10 percent stake in PetSmart on July 3, critics had a field day.
At that time, the pet retailer had become a popular target of short sellers betting its stock would fall. As of June 30, investors had shorted some 17 percent of the shares — an indication they thought its business was in trouble.
Jana's campaign was classic activism; it suggested PetSmart put itself up for sale and then sent a flurry of letters to the board complaining that the company wasn't taking its advice.
In the final letter, Jana threatened to release some damaging internal documents it had received as a result of its activist stake.
Within days, PetSmart waved the white flag and announced it had hired advisers to help look for a buyer.
Even then, few market players thought a deal could get done, given the company's poor prospects and fear that the debt needed to finance the deal would be eyed warily by regulators.
They were wrong. PetSmart became the most sought-out and biggest buyout of the year — and a quick and easy payday for Rosenstein.
On Dec. 14, BC Partners led a group of buyers that agreed to pay $8.7 billion for the retailer.
Activists also spurred on last year's second-largest buyout, Riverbed Techology's $3.6 billion sale, after Paul Singer's Elliott Management pushed for a deal for months. Elliott even bid on the company itself to start the auction process.
With PetSmart, Jana doubled its money in just five months, earning a cool $450 million.
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