Lextron, Inc., a Colorado-based distributor of livestock vaccines and supplements, said it plans to buy competitor Animal Health International, Inc., for about $111 million in cash.
Under the agreement, privately-held Lextron will pay $4.25 a share for all outstanding Animal Health stock, according to a joint statement released by the companies March 14. Lextron will also assume $140 million of Animal Health’s debt.
The buyout “provides an opportunity for us to collectively create the country's premier animal health business,” John Adent, Lextron’s chief executive officer, said in the statement.
“Building upon Lextron's four-decade presence in this industry, we are confident about the combined pool of industry expertise and resources we’ll be able to offer our customers,” Adent said.
The purchase is expected to close by the end of June, assuming the deal is approved by Animal Health’s shareholders and receives clearance from antitrust regulators. The combined company will be named Animal Health International. Leonard Green & Partners, a Los Angeles-based private equity firm, will help fund the transaction, the companies said.
Lextron’s buyout would mark the latest round of consolidation in the U.S. animal health industry, which grew rapidly over the past decade. In 2009, the industry generated about $6.7 billion revenue, up 43 percent from 2003, according to an Animal Health financial statement.
In March 2010, Merck & Co. and Sanofi-Aventis SA said they would combine animal health businesses into a 50-50 joint venture that analysts said would account for about a quarter of the $19 billion global market.
The global animal health market is expected to grow by about 5 percent annually through the middle of the decade on rising demand for meat and strong consumer needs for pet supplies, Merck and Sanofi said last year following the joint venture announcement.
Based in Westlake, Tex., Animal Health had net U.S. sales of $600.3 million in the company’s fiscal 2010, which ended June 30. Animal Health, which was founded in 1954, sells more than 40,000 products to more than 70,000 customers, including veterinarians, livestock feeders and animal health retailers.
Lextron’s planned purchase price, at $4.25 a share, would be a premium of 11 percent over Animal Health’s $3.83 closing price March 11. In afternoon trading March 14, Animal Health shares rose 37.5 cents, or 9.8 percent, to $4.205. The stock is up 46 percent this year.
Separately, two law firms said they are investigating potential legal claims against Animal Health’s board of directors, saying Lextron’s purchase price is too low.
The investigation “relates to the fairness of the proposed transaction” to Animal Health shareholders, according to a joint statement released March 14 by the Briscoe Law Firm and Powers Taylor, LLP: http://bit.ly/hLltcx
The firms are seeking to determine whether Animal Health’s board “obtained the best value for shareholders, adequately considered all viable alternatives, and properly shopped the company before entering into the acquisition agreement with Lextron,” according to the statement.
At least one industry analyst has set an estimated target price for Animal Health at $5, the firms said.
“Based on these and other factors, the firms do not believe that the acquisition price is fair” for Animal Health shareholders.
The firms didn’t immediately respond to e-mail messages seeking comment.