BUSINESS - Valpy Departure from Pets Plus Us Unexpected

Randy Valpy, noted developer of Canada’s leading pet health insurance brands, Petsecure and Pets Plus Us and founder of the North American Pet Health Insurance Association (NAPHIA) is leaving the pet health insurance industry.

In June 2016, Pethealth, a Fairfax Company, acquired Pets Plus Us from RSA and added this book of business to Canadian operations for Pethealth. Valpy became Vice President & Managing Director, Pet Insurance at PTZ Insurance Services Ltd. and continued in his role as Top Dog at Pets Plus Us.

Valpy received the Urban Animal Summit Award for Individual Achievement in 2013 for his strong collaborative goals and resolution to create healthy communities for people and pets.

The Summit for Individual Achievement recognizes an individual who is currently active in the companion animal industry and who is well regarded for their achievements.

According to the industry sources, Valpy will leave PTZ Insurance Services effective December 9th and take up responsibilities as President and CEO of LifeLearn in Guelph, Ontario, on December 12th.

Eric Coulson, Director of Sales and Operations for Pets Plus Us is expected to be named as interim ‘Top Dog’ and leader of the Pets Plus Us brand in Canada.

InfoStream has extended an invitation to interview both Eric and Randy about their new roles. 

Pethealth Inc. Acquires Vestafy

In May 2015, Pethealth Inc. acquired Vestafy; a workflow management software that specializes in the animal welfare industry. Vestafy was acquired fom Zeidman Technologies, LLC. Pethealth Inc. is “firmly committed to further investment in their platforms and growing their offerings.”

Steve Zeidman, the creator of Vestafy, said, “Vestafy was created to be customizable and shaped around what individual animal welfare organizations need and not the other way around.” Zeidman will join Pethealth Inc as the Vice President of Innovation and Research. Upon joining Pethealth Inc. Zeidman said, “As a member of a great team, I am committed to ensuring Vestafy and all Pethealth’s technology products empower our clients to focus their time and resources on our shared passion of saving lives.”

Michelle Cole, Pethealth Inc. Senior Vice President of Customer Success said, “We are happy to have Steve return to Pethealth working alongside Brad Grucelski and the PetPoint team. His years of experience and unique perspective will benefit both our company and our clients. Adding Vestafy to our suite of products further demonstrates our long-term commitment to delivering quality products and services for our partners in the animal welfare community.”

About Pethealth

Pethealth Inc., a Fairfax company, is one of the largest providers of medical insurance for dogs and cats to pet owners, operating in the United States, Canada and the United Kingdom. In addition, Pethealth is the leading provider of management software to North American animal welfare organizations through its cloud-based application and is the leading provider of RFID Microchips to the North American companion animal industry. Pethealth offers a unique range of products and services for shelters, veterinarians, and pet owners through a number of wholly-owned subsidiaries.

About Vestafy

Vestafy is the first Workflow Management Software in for the animal welfare field. It will surpass modular management software by providing unmatched flexibility, Vestafy allows each organization to customize the screens, workflows, and reports to directly match their operational processes and procedures.

READ THE MEDIA RELEASE

Ontario Teachers buy PetVet

Ontario Teachers transaction is just the latest pet industry buy

According to earlier reports this week, the Ontario Teachers Pension Plan has acquired PetVet Care Centers from Catterton Partners in a deal said to be valued at $440 million.

The Ontario Teachers Pension Plan (OTPP) is no stranger to investments in the Pet business. In 2005 OTPP acquired Doane Pet Care Enterprises the largest private label manufacturer of pet food in North America for $840 million dollars. Leveraging a strong management team and distribution network, OTPP was able to sell Doane to one of Doane's largest customers, Mars Inc., just a year later for $1.2 billion. Doug Cahill, now Managing Director of CCMP Capital, spearheaded Doane's growth from 1.7 billion to $4 Billion in three years and retained leadership of the US PetCare business through both transactions.

According to the numbers reported, the purchase of PetVet by OTPP values Catterton’s investment at 5.8 times the original acquisition. Catterton investors stand to reap almost 4.7 times their original investment in cash.


The PetVet acquisition is the latest in a string of transactions in the pet care sector that began in 2011. According to various reports including the Wall Street Journal increased consumer spending is driving premium prices to be paid for pet related acquisitions. Here is a list of several:

• 2015 January - PetVet from Catterton Partners by OTPP for $440 million (11 times EBITDA)
• 2014 December - Privatization of PetSmart Inc by BC Partners and friends for $8.7 billion (9.1 times EBITDA)
• 2014 November - Privatization of Pethealth by Fairfax Financial for $100 million (Consolidate value chain)
• 2014 August - Purchase of National Veterinary Associates from Summit Partners by Ares Management LP for $920 million (13 times EBITDA)
• 2014 August - Purchase of Pet360 by PetSmart for $130 million (Acquisition of users)
• 2014 April - Purchase of Iams and Eukanuba from Procter & Gamble by Mars Inc. for 2.9 billion (Consolidate market position)
• 2013 June - Purchase of PetFinder from Discovery Communications by Nestle Purina for undisclosed amount (Add media channel)
• 2013 May - Purchase of Heartville Group pet insurance by Fairfax Financial for undisclosed amount (Consolidate value chain)
• 2012 January - Purchase of Associated Veterinary Clinics by VCA Antech Inc. for $75.5 million (Expansion into Canada)
• 2011 September - Purchase of VetStreet (MediMedia) by VCA Antech Inc. from Vestar Capital Partners V.LP for $146 million (Add media channel)

In September of 2011, Bob Antin, chairman and CEO of VCA Antech, Inc., said, "We are excited about combining Vetstreet (media) with our existing businesses (laboratory services and clinics). We believe that this combination will provide both companies with outstanding growth opportunities." In 2012, after being acquired for $146 million, MediMedia revenues were expected to grow from $55 to $65 million. 

According to the American Pet Products Association, Americans spent almost $60 billion on their pets in 2014. This figure has tripled in the past 20 years despite the global economic downturn. According to Vet association estimates, healthcare spending for pets increased 6% during 2014 to $15.25 billion. Ontario Teachers see an opportunity to leverage pet spending with this investment. As the transaction list above shows they are not alone.

In a line of acquisition stretching over four years the goal has been consolidation, aggregation of the value chain, securing media channels and global market expansion. The question facing the industry and investors is what will be next. 

Expect management to refine business models by seeking to lower the cost of acquiring and maintaining customers (influencer/loyalty programs) and by more efficient delivery of the products and services pet owners desire. 

Fairfax Completes Pethealth Acquisition and Appoints CEO

Fairfax Financial Holdings Limited ("Fairfax") (TSX:FFH)(TSX:FFH.U) announced the completion of the acquisition of Pethealth Inc. ("Pethealth") late last week. The deal was first announced on August 29th at a price of $2.79 per share. John Varnell, Vice President, Corporate Development, also announced the appointment of Sean Smith as Chief Executive Officer of Pethealth and its subsidiaries. Fairfax Financial Holdings Limited is a financial services holding company which, through its subsidiaries, is engaged in property and casualty insurance and reinsurance and investment management. Fairfax Release

Fairfax Moves to Acquire Pethealth Inc

Fairfax Financial Holdings Limited has moved to acquire all of the outstanding common and preferred shares of Pethealth Inc for 100 million in cash. The Fairfax announcement appeared after the Toronto Stock Exchange closed on Friday, afternoon.

Read the Fairfax release

The acquisition follows quickly on the heels of recent reports that Pethealth was available for sale. Based on recent valuations of the company it appears Fairfax has paid a premium to own these assets. 

Pethealth shares were listed at $2.21/share when the TSE closed on Friday. The Fairfax offer is pegged at $2.79/share, well above the $2.50 valuation recommended by Industrial Alliance Securities analyst, Fred Westra. 

Although the Fairfax transaction was reported in the media and on the Fairfax site, the reporting of the transaction is absent from the Pethealth site. In reporting the transaction, Fairfax, noted that Mark Warren, the founder of Pethealth, had voted against recommending acceptance of the offer.

Fairfax is a financial services holding company which, through its subsidiaries, is engaged in property and casualty insurance and reinsurance and investment management. Prem Watsa the founder of Fairfax is likely remembered by most for a bid to acquire Blackberry, however, he is an investor that has often recognized value where others haven't. 

This Fairfax acquisition will bear watching as the deal completes during the 4th quarter and new Pethealth strategies become evident.

Management puts Pethealth Inc up for Sale

Rumours about Pethealth Inc. being available for sale appear to be true. Industry speculation about North America's third largest provider of pet insurance began to surface earlier this summer.

The first evidence of this move came on August 19th when the Wall Street Journal published a Pethealth (TSX:PTZ) statement that had the regulatory approval of security authorities. It gave no indication of a specific purchaser or path to sale, however, it mentioned evidence of unusual market activity with respect to the common shares of Pethealth. 

Read WSJ article

On August 22, Industrial Alliance Securities analyst Fred Westra, reported his assessment of the value of Pethealth. While it is unclear if the Company can sell itself, Westra sees a much higher share value than current markets have priced.

Then, on Tuesday, August 26th, Pethealth confirmed that it was “reviewing strategic alternatives for the potential sale of the company”.  Westra says this is street code that means “available for the right price”.

Westra claims there is “tremendous value” in Pethealth. Westra tackled the value of the company by examining the value of three units; its insurance business, its microchip and database operations, and its online adoption service:

• Westra  compares Pethealth’s insurance business to peer Trupanion (NYSE:TRUP) and arrives at a value of between $60-$80million.
• Westra compares Pethealth's microchip and database business to U.K.-based Animalcare PLC (LON: ANCR) to assign a value of more than $35-million.
• Westra believes the company’s Petango brand and ecommerce business is worth about $20-million, based on transactions by Discovery Communications (NASDAQ:DISCA), by Nestle Purina, and by PetSmart (NASDAQ:PETM).

Pethealth competitors, many of whom are members of the North American Pet Health Industry Association (NAPHIA) declined to comment on this development or the implications it might have for industry. According to industry sources, Pethealth did not participate in this industry wide association of healthcare insurance providers.

Westra’s 'sum-of-the-parts' valuation has him arrive at a price of $3.34 for Pethealth, but he says he could see upside as a high as $4.00 per share. However, at the time of his report, Westra continued to value the company based on an assumption it will remain independent.

Westra believes Pethealth will post adjusted EBITDA of $5.8-million on revenue of $52.2-million in fiscal 2014, numbers he thinks will rise to adjusted EBITDA of $8.1-million on revenue of $59-million the following year.


Upon completing his report, Westra maintained a STRONG BUY recommendation and 12-18 month target price of $2.50, implying a return of 37%. 

PetHealth reports Microchip movements in US, UK and Canada

PetHealth a leading provider of companion animal RFID technology for pets announced record microchip sales in January following strong growth in 2011.

The Company reported sales of 130,250 microchips in January, up 20.3% from January 2011 and surpassing the Company's previous monthly record of 121,895 microchip sales in August 2011. The increase in sales was driven in large part by record sales in the United Kingdom and the Company's introduction of the MiniChip, a much smaller microchip ideally suited for cats, kittens and smaller dogs. The January results come on the back of the Company's record sales of 1,341,000 microchips in Canada, the United States, and the United Kingdom for 2011.

Sales in microchips also helped drive a record number of registrations in the Company's 24PetWatch database, with over 98,000 new pets registered in January, bringing the total number of pets registered to over 5.3 million. The 24PetWatch database plays a key role in Pethealth's insurance and non-insurance operations alike and is supported by an in-house call centre that received nearly 22,000 inbound calls in January resulting in a record of over 7,400 unit sales of identification tags, Emergency Care policies, and annual and lifetime maintenance plans.

Microchips are sold through an extensive network of outlets which totaled 5,657 across the United States, Canada, and the United Kingdom in 2011.

Pethealth Inc. Announces Quarterly Results

The Company is hosting an investor conference call on Thursday, November 10th, 2011, at 10:00AM (EST) which can be accessed at 1-877-240-9772 or on-line at www.pethealthinc.com. For those unable to participate, a replay of the call will be available shortly after the call concludes on the Company's website at www.pethealthinc.com.

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CONSOLIDATED FINANCIAL

 HIGHLIGHTS:                             For three months ended

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('000)                           Sep 30, 2011     Sep 30, 2010     Change %

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Insurance Commissions and

 Fees                           $       5,466    $       5,784          (5)%

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Microchip Technology and Non-

 insurance Revenue                      2,852            2,397           19%

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Total Revenue                           8,318            8,181            2%

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Cost of Goods Sold                      1,461            1,337            9%

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Selling and marketing                   2,724            3,020         (10)%

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Administrative and general              3,252            3,279          (1)%

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Other income                                -                -            -

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Other expenses                            106              (16)         763%

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Total Expenses                          7,543            7,620          (1)%

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Results from operating

 activities                               775              561           38%

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Finance revenue                            15               14            7%

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Finance costs                              (5)             (37)          86%

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Profit before income tax                  785              538           46%

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 Income tax expense                        21              128         (84)%

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Net Income                                764              410           86%

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EPS - Basic (1)                          0.02             0.01          100%

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EPS - Diluted (1)                        0.02             0.01          100%

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EBITDA (2)                              1,239              984           26%

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Adjusted EBITDA (3)                     1,269              929           37%

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Gross Premiums Earned by

 Carriers                              14,289           15,367          (7)%

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(1) Basic and diluted earnings per share are adjusted to reflect the

    dividend payments made during the first quarter of 2011 and 2010. For

    the quarter ended September 30, 2011 the Company had weighted average

    basic common shares of 32,513,568 (2010 - 32,505,235) and fully diluted

    common shares of 37,515,527 (2010 - 37,484,539).

(2) The Company believes the presentation of EBITDA is a useful means of

    providing investors with additional information in reviewing and

    analyzing the Company's operating results. EBITDA is considered to be a

    non-IFRS earnings measure and does not have any standardized meaning

    prescribed by IFRS. It is, therefore, unlikely to be comparable to

    similar measures presented by other issuers. EBITDA is net income

    adjusted for interest, taxes and amortization.

(3) The Company believes the presentation of Adjusted EBITDA is a useful

    means of providing investors with additional information in reviewing

    and analyzing the Company's operating results. Adjusted EBITDA is

    considered to be a non-IFRS earnings measure and does not have any

    standardized meaning prescribed by IFRS. It is, therefore, unlikely to

    be comparable to similar measures presented by other issuers. Adjusted

    EBITDA is EBITDA adjusted for stock option and equity-based compensation

    expense and non-cash translation gains and losses associated with the

    Company's U.S. denominated debt.

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CONSOLIDATEDFINANCIAL

 HIGHLIGHTS:                              For nine months ended

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('000)                           Sep 30, 2011     Sep 30, 2010     Change %

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Insurance Commissions and

 Fees                           $      16,399    $      17,798          (8)%

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Microchip Technology and Non-

 insurance Revenue                      8,047            6,593           22%

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Total Revenue                          24,446           24,391          0.2%

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Cost of Goods Sold                      4,088            3,481           17%

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Selling and marketing                   7,928            9,680         (18)%

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Administrative and general             10,077            9,710            4%

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Other income                                -                -            -

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Other expenses                            147               36          308%

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Total Expenses                         22,240           22,907          (3)%

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Results from operating

 activities                             2,206            1,484           49%

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Finance revenue                            55               41           34%

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Finance costs                             (25)            (134)          81%

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Profit before income tax                2,236            1,391           61%

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 Income tax expense                       315             (284)         211%

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Net Income                              1,921            1,675           15%

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EPS - Basic (1)                          0.04             0.03           33%

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EPS - Diluted (1)                        0.04             0.03           33%

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EBITDA (2)                              3,600            2,747           31%

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Adjusted EBITDA (3)                     3,647            2,735           33%