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.
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.
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