Henry Schein (NSDQ:HSIC) said today it plans to spin off its Animal Health business and merge it with Vets First Choice to create a new combined animal health business which will operate under the moniker Vets First Corp.
The new company aims to use advanced data analytics, practice management software and other specialized technology to support animal health, and will combine Henry Schein Animal Health’s approximate 4,300 employees with Vets First Choice’s 750 US employees.
The newly formed business will have pro forma 2017 sales of approximately $3.6 billion, Henry Schein said.
“We are excited about the merger of Henry Schein Animal Health with Vets First Choice. Over the years we have observed the impressive success of Vets First Choice and believe the combined management team is well positioned to capitalize on the significant opportunities created by the merger. We are similarly excited about the significant growth opportunities for Henry Schein’s dental and medical businesses as we implement our 2018-2020 strategic plan. Building upon our long history of reinvention, the company will continue to expand our offering of innovative solutions for our dental and medical customers. We see significant growth opportunities in both the dental and medical markets, such as advancing our position in practice management solutions, including those provided by our new Henry Schein One joint venture, and expanding our penetration with health care practitioners and specialists as well as large group practices and ambulatory care sites.” Henry Schein board chair & CEO Stanley Bergman said in a prepared release.
Once the transaction closes, Henry Schein said it’s pro forma 2017 revenue from remaining businesses are expected to be $9 billion, with approximately $690 million in GAAP operating income or $695 million on a non-GAAP basis.
Henry Schein said that it will nominate six individuals to its board of directors, and Vest First will nominate five individuals to the board, with Vets First CEO Ben Shaw moving to become CEO of the combined company.
“We are early in the lifecycle of rapid technological change in the animal health market. This merger creates an enhanced value chain that connects the veterinarian, the manufacturer, and the pet owner through insights and analytics that will support better clinical and financial outcomes. This new global animal health care company is focused on improving clinical compliance by facilitating the delivery of care how, when, and where the pet owner wants it. By combining forces with HSAH, we anticipate accelerating the introduction of new and enhanced programs, services, and technology to veterinary teams so they can deepen their focus on doing the great work of caring for the animals in our lives. Manufacturers will benefit from a global platform to help drive category growth, improved client engagement, and enhanced medication and service compliance. At the same time, team members of the combined company will continue to contribute in a highly collaborative environment with the shared goal of supporting our customers’ success,” Vets First Choice founder & CEO Ben Shaw said in a press release.
The transaction has already been approved by boards at both companies, and Henry Schein said it expects to receive between $1 billion and $1.3 billion in cash on a tax-free basis as part of the transaction. Funds from the sale will be used for general corporate purposes, share repurchases, repaying debt and for future acquisitions.
The deal is expected to close by the end of this year, Henry Schein said.
“For Henry Schein, we believe the transaction benefits our shareholders in two ways. We believe Vets First Corp., as an independent public company focused exclusively on animal health, will be well-positioned to achieve a premium valuation in the market. We believe the transaction positions Henry Schein shareholders to benefit from their investment in a more focused dental and medical growth company. Following the spin-off of HSAH as an independent company, Henry Schein will focus on our market-leading dental and medical businesses as we make continued investments for future growth. We are confident in our ability to build upon our track record of delivering solid internal and acquisition growth, as we have over our 23-year history as a public company. We believe our formula of serving the dental and medical markets with innovative products, solutions, and support will position us well to drive increased top and bottom line growth going forward,” Bergman said in a prepared statement.
In February, the U.S. Federal Trade Commission filed a complaint against Henry Schein, Patterson (NSDQ:PDCO) and Benco alleging violations of US antitrust law by conspiring to refuse to provide discounts to or to serve buying groups representing dental practitioners.
Intuitive Surgical enjoyed a nearly two-decade monopoly in the robot-assisted surgery space. At DeviceTalks West, we'll delve into that history as longtime CEO Gary Guthart tells us how he got his start in medtech, how Intuitive came to enjoy such a commanding lead and what the future holds for medical robotics.
Use code GUTHART to save an additional 10%.