UPDATE 1-Hedge fund Jana Partners to seek PetSmart sale

(Adds details, updates shares)

July 3 (Reuters) - Activist hedge fund Jana Partners LLC said it planned to ask PetSmart Inc to explore a sale, sending the pet product retailer's shares up 15 percent.

Jana Partners reported a 9.9 percent stake in PetSmart in a regulatory filing, making it the company's largest shareholder. (http://1.usa.gov/1orkOfN)

PetSmart lowered its sales outlook in May for the year ending January, citing a "challenging and volatile consumer environment and competitive market".

Central Garden & Pet Co received a $750 million offer last month from Philip Falcone's Harbinger Group Inc for its pet products business. Harbinger also offered $10 per share for the whole company, valuing it at more than $1 billion including debt.

Jana Partners said on Thursday it expects to hold discussions with PetSmart's management and board, shareholders and other interested parties.

The investor also plans to discuss the company's capital structure - including returns to shareholders - improving disclosures as well as management and board composition.

PetSmart was not immediately available for comment.

Jana, run by Barry Rosenstein, often pressures companies it invests in to change strategies or sell themselves. It disclosed a stake in grocery chain Safeway Inc in September and asked it to explore strategic alternatives.

Safeway agreed to be acquired by private equity firm Cerberus Capital Management in a deal valued at about $9.4 billion in March.

Jana also took a large stake in Redbox video rental operator Outerwall Inc last year and asked for a sale. It lost a battle to break up fertilizer company Agrium Inc when all its nominees failed to get elected to its board.

PetSmart shares, among the top percentage gainers on the Nasdaq on Thursday morning, shot up to $69. The company was valued at $5.93 billion at Wednesday's close.

(Reporting by Sruthi Ramakrishnan in Bangalore; Editing by Joyjeet Das; Editing by Joyjeet Das)