Animal Hospital Network to Go Private in $321-Million Buyout
Animal hospital network Veterinary Centers of America Inc. said Friday it would go private in a $321-million buyout, the latest in a string of firms looking for more profitable pastures as private companies.
Under the terms of the deal, led by Green Equity Investors, the Santa Monica-based company’s stockholders would receive $15 in cash for each share owned. The company said the deal should be completed in the third quarter.
Green Equity Investors is an affiliate of Leonard Green & Partners, a private Los Angeles-based merchant banking firm specializing in organizing, structuring and sponsoring management buyouts, going private transactions and recapitalizations of established public and private companies.
Shares of Veterinary Centers rose 38 cents to close at $13.75 on Nasdaq. The buyout price represents a 9% premium.
“It’s a smart move,” said a New York analyst who declined to be named. “The company was having problems attracting stock market investors. This is a good deal for shareholders, it has an adequate premium.”
Veterinary Centers’ move is the latest in a spate of buyouts and a rash of companies going private, some by being enveloped into other companies, others with the assistance of private equity firms, showing that some companies are worth more to the private marketplace than to shareholders.
For example, socially conscious ice cream maker Ben & Jerry’s Homemade Inc. said earlier this week that it was considering going private in a deal involving Anglo-Dutch food and consumer products firm Unilever, and U.S. Can Corp. recently received a proposal from an equity firm that wanted to take the company private.
Books and music retailer Borders Group Inc. said earlier this month it hired an advisor to review options, which include a leveraged buyout.
A leveraged buyout uses debt to buy back publicly traded shares, then the borrowing is repaid from asset sales or cash flow.
Hotel and casino operator MGM Grand Inc. is in the process of buying Mirage Resorts Inc., and airlines such as Continental Airlines Inc. have discussed going private, according to a report published in the Wall Street Journal.
Veterinary Centers entered into the merger agreement following the unanimous recommendation of a special committee of the nonmanagement directors of the company’s board of directors, the company said.
Investors in today’s rabid stock market aren’t turned on by staid stakes like Veterinary Centers, analysts said.
“This was a sexy company 10 years ago,” said Mark Robbins, editor in chief of Red Chip Review. “This is a leveraged buyout looking for a place to happen. The marketplace today made this alternative obvious.”
Bob Antin, chairman and chief executive of Veterinary Centers and other members of management will retain part of their stock in the surviving company, although a substantial number of their shares will be acquired at the same price as the other outstanding shares.
“The market is not perfect and hasn’t been for a long time. The stock has been continuously undervalued,” Antin said. Going private “allows management to become more vested. When a stock is neglected it doesn’t represent fair value.”
The company, which runs 200 animal hospitals and 14 labs, will stay the same, Antin said. There will be no layoffs or management changes.
