Stock Watch: Petstore Deal Sends Pets.com Lower

Pets.com (Nasdaq: IPET) fell 1/16 to 2 1/16 Tuesday after announcing an agreement to acquire rival pet supply e-tailer Petstore.com for 5.8 million common shares and 850,000 convertible preferred shares.

The agreement includes a partnership with Petstore backer Discovery Communications, which will promote Pets.com on its TV networks and give the company an e-commerce position with links on its Web site.

Pets.com also said it will form a two-year cross-promotional agreement with food retailer Safeway, Inc. The grocery chain will promote Pets.com in its stores and ads, and Pets.com will carry Safeway Select brand pet foods on its site.

Pets.com said it will acquire Petstore’s database of customers and newsletter subscribers, as well as its trademark, trade name, domain name and its live-fish business, Flying Fish Express. Pets.com will also get a $3 million equity investment.

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