Petco laps up the assets of Petopia.com

Brick-and-mortar pet-supply giant Petco Animal Supplies announced Tuesday that it had acquired the assets of Petopia.com, its e-tail affiliate.

Petopia will continue for now to operate under its own domain name and remain based in San Francisco, said James Myers, Petco chief financial officer. Myers declined to give the financial details of the deal, which the companies completed Tuesday.

"The Internet customer is here to stay," Myers said. "This is an opportunity to ensure that we continue to be able to serve the Internet customer."

Petopia representatives were not immediately available for comment.

The move is similar to the one made last month by Petsmart, the chief offline rival of San Diego-based Petco. Petsmart agreed to invest $30 million in Petsmart.com, which increased its stake in the e-tailer from 48 percent to 81 percent.

The move comes amid growing consolidation and upheaval in the online pet-supply market. Last week, Petsmart.com signed a letter of intent to purchase the Pets.com domain name. Amazon.com-backed Pets.com closed its doors last month and laid off 80 percent of its staff.

"If you look at where we are today, it's come down to Petsmart.com and Petopia.com/Petco.com," Myers said. "Just as we're the leading players in the brick-and-mortar kind of world, we'll be the leading players in the e-commerce world as well."

But the two companies have not been without their own problems online. Petsmart.com withdrew its planned $115 million initial public offering last week, citing market conditions. Meanwhile, Petopia postponed its $100 million IPO that it filed in March. And in October, the company cut 60 percent of its staff.

As of March, Petco owned a 26 percent stake in Petopia.

Myers declined to say whether Petopia had run out of cash, saying only that it faced "financing concerns." He also declined to say whether Petopia's other investors will be paid for their stakes in the company. Petopia's other investors include Technology Crossover Ventures, NBC and Arkaro Holding.

"We basically just bought the assets of the company," Myers said. "The company can divide (the proceeds) itself."

Only a select group of Petopia's marketing, merchandising and site-operations staff will retain their positions with the company, Myers said. Although he declined to indicate the number of employees remaining at the company after the acquisition, Myers said Petopia chief executive Andrea Reisman will not continue with the company.

Petco's acquisition of Petopia's assets comes just two months after Leonard Green & Partners and Texas Pacific Group acquired Petco. As part of that deal, Petco became a private company.