Strategy

Mars Expands Petcare Empire With VCA Deal

The $7.7 billion acquisition will add VCA's 800 animal hospitals to a Mars petcare business that already includes several pet food brands.
Matthew HellerJanuary 9, 2017
Mars Expands Petcare Empire With VCA Deal

Candy conglomerate Mars Inc. has agreed to acquire animal hospital operator VCA for $7.7 billion in a deal that will make petcare its largest business.

VCA’s 800 hospitals and 60 diagnostic laboratories in the U.S. and Canada will be added to a Mars petcare empire that already includes the Banfield pet hospital chain and the Pedigree, Whiskas and Sheba pet food brands.

Mars said Monday it will pay $93 a share for VCA, a premium of about 31% to the closing price on Friday. The stock rose more than 28% Monday, closing at $90.79.

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“VCA is a leader across pet healthcare and the opportunity we see together — for pets, pet owners, veterinarians and other pet care providers — is tremendous,” Mars Chief Executive Grant Reid said in a news release.

Mars is best-known as the world’s No. 1 confectionery maker but it is also the biggest pet food company in the world, with a quarter of the $71.77 billion global market as of 2015.

“Candy makers have been diversifying their business as calorie-conscious consumers increasingly shun sugary sweets, a trend that has weighed on the $183 billion global confectionery market,” Reuters noted.

Originally called Veterinary Centers of America Inc., VCA has used acquisitions to combine hospitals, diagnostic labs and veterinarians into a single network. It employs 23,000 people and had 2015 revenue of $2.1 billion.

“Considering that growth in pet healthcare has averaged 7-8 percent over the long term, the addition of VCA would help Mars tap into this appealing market,” Morningstar analyst Debbie Wang wrote in a note to clients.

Mars already uses VCA’s lab services in its veterinary businesses. “VCA’s industry-leading partnerships with veterinarians and pet care providers together with its expertise in veterinary services, diagnostics and technology will position Mars to deliver accessible, quality care and continue to create a better world for pets,” Mars Global Petcare President Poul Weihrauch said.

Mars will also assume $1.4 billion in VCA debt, bringing the total value of the transaction to $9.1 billion.

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