Henry Schein to spin off veterinary business
A tax-free deal involving Vets First Choice will create a new company called Vets First Corp.
Henry Schein Animal Health, which distributes products and services to 75 percent of U.S. veterinarians, will merge with the prescription management and analytics company Vets First Choice, the two sides announced April 23.
The deal, which is expected to close by late 2018, would leave parent company Henry Schein Inc. with its human medicine and dental businesses. The Melville, New York, company expects to net $1 billion to $1.25 billion in tax-free cash from a transaction called a Reverse Morris Trust.
The merged company, to be called Vets First Corp., will be headquartered in Portland, Maine, the home of Vets First Choice. The CEO will be Vets First Choice CEO and co-founder Ben Shaw.
“This merger creates an enhanced value chain that connects the veterinarian, the manufacturer and the pet owner through insights and analytics that will support better clinical and financial outcomes,” Shaw said. “This new global animal health care company is focused on improving clinical compliance by facilitating the delivery of care how, when and where the pet owner wants it.”
Henry Schein Animal Health, based in Dublin, Ohio, employs 4,300 people and does business worldwide, reaching 70 percent of veterinarians in Europe, Australia and New Zealand. Half of U.S. veterinary clinics use Henry Schein practice management software, the company stated.
Vets First Choice, founded in 2010, has 750 employees and has 5,100 veterinary practices enrolled in its prescription management program.
Henry Schein plans to use the $1 billion-plus windfall “for general corporate purposes, including share repurchases, repayment of indebtedness and acquisition opportunities,” the company reported.
“We see significant growth opportunities in both the dental and medical markets, such as advancing our position in practice management solutions,” said Stanley M. Bergman, chairman and CEO of Henry Schein Inc.
Bergman will serve on the Vets First Corp. board of directors.
The transaction is structured in such a way that Henry Schein shareholders will own 63 percent of Vets First and Vets First Choice shareholders will own the remaining 37 percent.
What is a Reverse Morris Trust?
As a tax-avoidance strategy, the Reverse Morris Trust allows a corporation to spin off property, corporate divisions and other assets without having the profits from the sale taxed. The Reverse Morris Trust is a variation of the Morris Trust. For a tax-free spinoff like the Morris Trust to work, there must be a parent company selling assets, a subsidiary and an external buyer unrelated to the parent company.
Source: Wise Geek