Transformational Acquisition More Than
Doubles the Size of Patterson Veterinary Business
Potential Sale of Medical Business Also
Planned by Patterson Companies
Combination of Two Transactions Expected to
Result in Repositioned Company Focused on Dental and Veterinary
Segments
Patterson Companies, Inc. (Nasdaq:PDCO) today announced a
definitive agreement to acquire Animal Health International, a
leading production animal health distribution company in the United
States. This acquisition will more than double the size of
Patterson’s veterinary business. The combined unit will offer a
range of products and services to customers in the United States,
Canada and the United Kingdom. Concurrently, Patterson Companies
also announced the potential sale of its medical rehabilitation
business.
According to Scott P. Anderson, chairman and chief executive
officer of Patterson Companies, “This is a transformational move
for Patterson Companies. Acquiring Animal Health International
firmly establishes Patterson in the production animal health
market, in addition to building on our already strong presence in
the companion pet market. This acquisition is a key part of our
previously disclosed strategic intent to take a broadened view of
our markets and position our businesses to generate profitable
growth and increase shareholder value.” The Boards of Directors of
both companies unanimously approved the transaction. The
acquisition of Animal Health International is expected to close
following regulatory approval in the Company’s fiscal first
quarter.
Under terms of the definitive agreement, Patterson Companies
will acquire all of Animal Health International’s stock for
approximately $1.1 billion in cash. Animal Health International
generated sales and EBITDA of $1.5 billion and $68 million,
respectively, during the 12 months ended March 2015. The purchase
price reflects a 16x trailing EBITDA multiple. Patterson Companies
is financing the acquisition through a combination of a $1 billion
unsecured term loan and a $500 million unsecured cash flow
revolving line of credit. The initial interest rate under the
credit agreement is expected to be LIBOR plus 200 basis points.
Patterson expects $20 million to $30 million of synergies to
result from the Animal Health International acquisition, to be
realized over a three-year period. The Company’s debt to EBITDA
ratio will rise to approximately 3.5x immediately after the
acquisition. Patterson intends to apply the proceeds from the
potential sale of its medical business to reduce the Animal Health
International acquisition debt. In the event the medical business
is sold, the Company expects the debt to EBITDA ratio to be
approximately 2.5x.
The acquisition of Animal Health International and the
realization of planned synergies, coupled with the potential
divestiture of the medical business, is expected to be neutral to
fiscal year 2016 adjusted earnings per share, excluding one-time
transaction costs and amortization. The Company anticipates the two
transactions will lead to higher adjusted earnings per share
beginning in fiscal year 2017.
Patterson has retained BofA Merrill Lynch to explore the
potential sale of the medical business. Through the last 12 months
ended January 2015, sales and adjusted operating income of the
medical segment were $468 million and $64 million, respectively.
Management has determined that this unit, while well positioned in
the marketplace, is not a core part of the Company’s long-term
growth strategy. “Today our medical business is solid, with a
strong product portfolio and a dedicated employee group. We are
confident that it will flourish under new ownership that can focus
on driving growth in the rehabilitation market,” commented
Anderson.
Patterson believes that positioning the Company to focus on the
dental and veterinary markets provides an opportunity to build
scale and capabilities.
Anderson said, “We believe concentrating Patterson’s resources
and management on growing our closely aligned dental and veterinary
units – both organically and through acquisitions – will enrich our
ability to maximize the return on the capital we invest.”
Animal Health International’s president and chief executive
officer John Adent, stated, “We are pleased to join forces with
Patterson. For Animal Health International, we now have greater
access to capital from a diversified company that can be used to
fuel further future expansion. We have long admired Patterson and
how they have built their veterinary business. We look forward to
combining our two organizations into a formidable competitor
serving key animal health sectors.”
John Adent will lead the combined veterinary business as
president. George Henriques, currently the head of Patterson
Veterinary, will serve as chief commercial officer. “Together they
will form a management group that is second to none in the animal
health industry,” said Anderson.
Advising Patterson on both the Animal Health International
acquisition and the potential medical business sales is BofA
Merrill Lynch. Animal Health International’s advisor in the
transaction is Piper Jaffray.
Patterson Companies will hold an investor conference call and
webcast today, Monday, May 4, 2015, at 11 a.m. ET (10 a.m. CT) to
discuss this announcement. To join the live call, U.S. and Canadian
participants should dial (888) 587-0615, with international callers
dialing 719-325-2494; the conference ID# for the live call is
9133650. To access the live webcast, investors can go to
www.PattersonCompanies.com. The conference call will be archived on
Patterson’s website. A call replay will be available for two weeks;
interested persons can dial (888) 203-1112 and provide the
conference ID 9133650, when prompted.
About Animal Health International, Inc.
Animal Health International, Inc. is the leading full-line
animal health products, services and technologies company in North
America, representing and distributing products for more than 1,000
manufacturers in the areas of companion animal, equine, beef and
dairy cattle, poultry and swine. Animal Health International
meets the needs of its customers and suppliers with strategically
located distribution points, more than 400 sales and customer
service representatives, innovative technologies, and the broadest
offering in the industry. Animal Health International has been
serving the animal health community for more than 40 years by
providing its dealer, producer and veterinary customers quality
products, services and technologies at competitive prices, by
partnering with and supporting both leading and emerging
manufacturer partners, and by engaging and developing motivated and
talented employees at all levels. Animal Health International
proudly gives back to the communities we serve through the funding
and support of education initiatives, leadership on important
industry topics, and by continued support of youth in agriculture.
For more information, please visit
www.animalhealthinternational.com.
About Patterson Companies, Inc.
Patterson Companies, Inc. is a value-added distributor serving
the dental, companion-pet veterinarian and rehabilitation supply
markets.Dental MarketAs Patterson’s
largest business, Patterson Dental provides a virtually complete
range of consumable dental products, equipment and software,
turnkey digital solutions and value-added services to dentists and
dental laboratories throughout North America.Veterinary MarketPatterson Veterinary is a leading
distributor in the U.S. and U.K. of consumable veterinary supplies,
equipment and software, diagnostic products, vaccines and
pharmaceuticals predominantly to companion-pet veterinary
clinics.Rehabilitation MarketPatterson
Medical is the world’s leading distributor of rehabilitation
supplies and non-wheelchair assistive patient products to the
physical and occupational therapy markets. The unit’s global
customer base includes hospitals, long-term care facilities,
clinics and dealers.
This release contains forward-looking statements as defined in
the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are information of a non-historical
nature and are subject to risks and uncertainties that are beyond
the Company’s ability to control. Any statements made in this press
release about the Company’s future financial conditions, results of
operations, expectations, plans, or prospects constitute
forward-looking statements. Forward-looking statements also include
those preceded or followed by the words "anticipates," "believes,"
"could," "estimates," "expects," "intends," "may," "plans,"
“projects,” “should,” "targets" and/or similar expressions. These
forward-looking statements are based on the Company’s current
estimates and assumptions and, as such, involve uncertainty and
risk. Forward-looking statements are not guarantees of future
performance, and actual results may differ materially from those
contemplated by the forward-looking statements because of a number
of factors, including the factors described in Item 1A of the
Company’s most recent Annual Report on Form 10-K, which factors are
incorporated herein by reference. Any forward-looking statement in
this release speaks only as of the date in which it is made. Except
to the extent required under the federal securities laws, the
Company does not intend to update or revise the forward-looking
statements.
Patterson Companies, Inc.Ann B. Gugino, 651-686-1600Vice
President & CFO
Patterson Companies (NASDAQ:PDCO)
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