Candy and pet food conglomerate Mars Inc is buying veterinary hospital operator VCA Inc (WOOF.O) for $7.7 billion in a deal that will give the maker of Pedigree pet food an even bigger share of the $4 billion global pet healthcare market.
The deal will help family-owned Mars, better known for candies such as M&Ms and Snickers, add about 800 pet hospitals to its network of more than 900 clinics, which includes the 61-year-old Banfield pet hospital chain.
McLean, Virginia-based Mars is already the biggest pet food company in the world – it held a quarter of the $71.77 billion global pet food market as of 2015 – followed by Nestle SA (NESN.S), the maker of the Purina cat and dog food brand.
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.
Rival Hershey Co (HSY.N) is also expanding beyond chocolates – it bought Krave, a beef jerky maker, in 2015, while Mondelez International Inc (MDLZ.O) recently introduced Good Thins, its first snack brand in more than a decade.
“While most of Mars Pet is focused on food, the firm had long dabbled in pet healthcare services,” Morningstar analyst Debbie Wang wrote in a note.
“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.”
Mars said it would offer $93 per share, a premium of 31.4 percent to VCA’s Friday closing price. Including debt, the deal is valued at $9.1 billion.
VCA’s shares were up 19.8 percent at $90.60 in afternoon trading on Monday. The company, founded in 1986, had annual sales of $2.13 billion in 2015.
Mars, which also owns the BluePearl chain of emergency and specialty veterinary care clinics, had annual pet food sales of $17.80 billion in 2015, according to Euromonitor data.
Morgan Stanley & Co. LLC and BDT & Co were Mars’ financial advisers, while Skadden, Arps, Slate, Meagher & Flom provided legal advice.
Barclays was VCA’s financial adviser and Akin Gump Strauss Hauer & Feld LLP and Potter Anderson Corroon LLP were legal advisers.
Source: Reuters.com