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.
“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.
