MWI Veterinary Acquired by AmerisourceBergen (NASDAQ:ABC)

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By Ross Schwartz on January 14, 2015 Company

In order to tap the growing health market for animal health products, the drug wholesaler company AmerisourceBergen (NASDAQ:ABC) has decided to acquire MWI Veterinary. The total acquisition price of the merger has been decided at $2.5 billion, whereas each share of MWI Veterinary will be acquired at a price of $190, and paid for in a cash and long term debt tender. This price per share will include an 8% premium AmerisourceBergen (NASDAQ:ABC) will pay on top of the closing share price of MWI Veterinary last Friday.

The total value of the acquisition has been set at $2.5 billion, although if per share price is multiplied with the total outstanding shares of the company, the value is slightly greater. This decrease in value is a consequence of the fact that AmerisourceBergen (NASDAQ:ABC) will be acquiring the $76 million in debt MWI Veterinary owes to various financial institutions and creditors. The tender offer to finalize the acquisition will be given out by the end of this month, January 26^th to be exact.

The tender will be a combination of cash and long-term debt, whereas first all the cash AmerisourceBergen (NASDAQ:ABC) will have after making all internal adjustments will be paid out to settle whatever amount can be settled of the total acquisition price, and the rest (most of the acquisition price) will be paid for in long-term debt instruments that MWI Veterinary will hold against AmerisourceBergen (NASDAQ:ABC). By law, most of the shares will have to be tendered by the current shareholders of MWI Veterinary.

According to analysts, the acquisition by AmerisourceBergen (NASDAQ:ABC) of MWI Veterinary will surely improve the earnings for the former. It is being expected that per share earnings will improve by 8 cents by the end of 2015, with almost $50 million in contribution to synergies. Higher profits are also being expected for AmerisourceBergen (NASDAQ:ABC) in the long run, due to the fact that the company would now be tapping into the already booming animal health market.

Currently, the overall value of the animal health industry is around $22 billion, which, on average, grows by 5.7% annually. According to reports, pet ownership is on the rise in the US, and this translates positively onto growing sales for animal health products in the US. In 2014 only, sales of animal health products grew by 3.5%, reaching a total worth of $10.2 billion by the end of September. With its excellent logistical capabilities, and now utilizing the global access held by MWI Veterinary that it will provide to the animal health market, AmerisourceBergen (NASDAQ:ABC) will expand exponentially in the industry, according to experts.

Analysts argue there is currently very limited competition in the animal health industry, hence for a giant such as AmerisourceBergen (NASDAQ:ABC) to enter the market means undisputed profits of a long term nature. The merger comes as the biggest of this decade for AmerisourceBergen (NASDAQ:ABC), and the second biggest by the company throughout its lifetime. The biggest merger the company made was in 2001, when it acquired Bergen Brunswig Corp.