Heska Corporation (NASDAQ: HSKA – News; “Heska” or the “Company”), a provider of advanced veterinary diagnostic and specialty products, announced today that the Company has entered into an agreement (the “Agreement”) to acquire 100% of the capital stock of scil animal care company GmbH (“scil”) from Covetrus, Inc. (NASDAQ: CVET) (the “Acquisition”). Founded in 1998 and headquartered in Germany with operations in France, Italy, Spain and Canada, scil has grown into a veterinary point of care laboratory and imaging diagnostics leader, serving pets and their families across Europe and the globe. With the combination of two of the world’s top veterinary diagnostics companies servicing millions of pets through tens of thousands of veterinarians and active analyzers across the globe, Heska expects to:
- reach over 25 countries to win a top three position in key markets to capture market share of at least: United States (≈12.5%), Canada (≈13%), Germany (≈40%), Spain (≈40%), France (≈30%), and Italy (≈19%), and to leverage a strong and growing presence in the Czech Republic, the Netherlands, Poland, the United Kingdom, Australia, Latin America and Malaysia;
- include over 500 total employees, with direct sales teams in 10 countries spanning Europe, North America and Australia;
- generate approximately $200 million in sales for 2020, subject to the closing and closing date of the Acquisition and other conditions;
- derive 93% of sales in Core Companion Animal, with total 2020 sales estimated to come from Laboratory (60%), Imaging (23%), Other CCA (10%), and Other Vaccines and Pharma (7%); and
- deliver a favorable geographic sales mix for growth from North America (62%) and greater Europe (37%).
Heska’s Chief Executive Officer and President, Kevin Wilson, commented, “I am thrilled to welcome the entire scil animal care team to our Heska family. Heska ended December as a clearly advancing #3 in North America but largely unrepresented overseas. We begin January a much stronger #3 in North America and a solid #1 or #2 in key European markets, with footholds and assets in place to drive more deeply and more broadly everywhere. By joining with Optomed in France (announced last year), CVM in Spain (announced last week), and scil now, we emphatically reaffirm our commitment to our strategic goals to: (1) double the customers and geography Heska serves, (2) double Heska’s addressable revenue-product streams and (3) continuing to win in our baseline business. After two focused years of preparation and investment, we now rapidly advance all of these goals in 2020 as a global team capable of globally partnering with individual veterinarians, corporate hospital consolidators, pharmaceutical leaders and diet companies. Into this new global reach, we intend to drive Heska’s new products pipeline, including the new Element RC (rotor chemistry), new Element i+ (immunoassay) and upcoming Element UF (urine and fecal), which we continue to expect to reach market later this year.”
Transaction Details
Heska will purchase scil for $125 million in cash, subject to working capital and other adjustments as set forth in the Agreement. The Acquisition is expected to close in the next 60 to 90 days, subject to the satisfaction or waiver of closing conditions set forth in the Agreement, including the receipt by Heska of audited financial statements of scil for the years ended December 31, 2018 and 2019 and other customary closing conditions. The Acquisition is not subject to any financing condition. Piper Sandler acted as the exclusive financial advisor to Heska for the Acquisition.
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Heska intends to finance the transaction through a private offering of $125 million of Convertible Preferred Stock (“Preferred Stock”) pursuant to a Securities Purchase Agreement (the “Financing Agreement”), dated as of January 12, 2020. The transactions contemplated by the Financing Agreement are expected to close at the time the Company closes the Acquisition, subject to customary closing conditions. 125,000 shares of Preferred Stock (“Preferred Shares”) will be issued pursuant to the Financing Agreement, under which the Company expects to exercise its right to convert the Preferred Shares into 1,508,751 shares of the Company’s Public Common Stock following and subject to the receipt of an affirmative shareholder vote at the Company’s annual shareholder meeting to increase the number of authorized shares of Public Common Stock; provided however, if such affirmative shareholder vote is not obtained and the conversion of the Preferred Shares does not occur, the Company will pay a cash dividend to the owners of Preferred Shares at an initial per annum rate of 5.75%, which shall increase in subsequent periods up to a maximum per annum rate of 7.25%. The conversion of the Preferred Shares will result in dilution of less than 20% of total shares of the Company’s Public Common Stock currently issued and outstanding.
Heska anticipates costs associated with the Acquisition and other end-of-year transactions related activities will have an impact on 2019 reported earnings. Heska expects the Acquisition to be moderately accretive to 2020 earnings per share. The Company will provide its 2020 full-year outlook on the upcoming 2019 fourth quarter and full-year report late February and will provide a multi-year outlook at its upcoming May 20, 2020 Investor Day in New York.
Source: PR Newswire