Covetrus taken private in $4bn deal

August 2022 | DEALFRONT | PRIVATE EQUITY & VENTURE CAPITAL

Financier Worldwide Magazine

August 2022 Issue

In a transaction that will take the firm public, animal-health technology and services company Covetrus is to be acquired by funds affiliated with global private investment firm Clayton, Dubilier & Rice (CD&R) and TPG Capital, the private equity platform of global alternative asset management firm TPG.

Under the terms of the definitive agreement, TPG Capital will acquire all the outstanding shares of Covetrus common stock not already owned by affiliates of CD&R – approximately 24 percent of Covetrus’ outstanding shares of common stock is currently beneficially owned by CD&R and its affiliates – for $21 per share in cash, representing an enterprise value of approximately $4bn.

The transaction will be financed through a combination of cash funded by investment funds affiliated with CD&R and TPG Capital, as well as committed debt financing.

Upon completion of the transaction, Covetrus will become a private company and will no longer be publicly listed or traded on Nasdaq. Covetrus’ management team, including Benjamin Wolin, president and chief executive, is expected to continue to lead the company. Covetrus plans to maintain its headquarters in Portland, Maine, and will continue to operate under its current brands.

“This transaction is an important milestone for our company, shareholders, employees, customers and partners,” said Benjamin Wolin, president and chief executive of Covetrus and a member of its board of directors. “Not only does this deal provide compelling value for our existing shareholders, but it also allows Covetrus to continue its mission to drive positive outcomes – both business and healthcare – for veterinarians across the globe.”

The proposed transaction has been unanimously approved by a transaction committee of independent directors of the board of directors of Covetrus.

Headquartered in Portland, Maine with more than 5700 employees serving over 100,000 customers around the globe, Covetrus is dedicated to empowering veterinary practice partners to drive improved health and financial outcomes, bringing together products, services and technology into a single platform that connects its customers to the solutions and insights they need to work best.

“Covetrus has undergone a true transformation since our initial 2015 investment in its predecessor Vets First Choice, growing from $55m in revenue focused primarily on online pharmacy in the US to a leading global provider of animal health services with more than $4.6bn in revenue,” said Sarah Kim, a partner at CD&R. “We are excited to have this opportunity to grow our investment in Covetrus and to do so in partnership with TPG and management.”

The transaction is expected to close in the second half of 2022, subject to certain regulatory approvals and the satisfaction of other customary closing conditions, including the approval of Covetrus’ shareholders.

Serving as lead financial adviser to Covetrus is Goldman Sachs & Co. LLC, with Lincoln International LLC also serving as financial adviser. Weil, Gotshal & Manges LLP is serving as legal counsel. Deutsche Bank Securities Inc., UBS Investment Bank, BMO Capital Markets and Mizuho Securities USA LLC have provided committed debt financing for the transaction and are serving as financial advisers to CD&R and TPG Capital. Debevoise & Plimpton and Ropes & Gray are acting as legal counsel for CD&R and TPG Capital.

“Covetrus is at an important stage in its ongoing evolution,” concluded Kendall Garrison, a partner at TPG Capital. “We look forward to partnering with Covetrus’ management and CD&R to further its leadership in the growing animal health space.”

Fraser Tennant