PetIQ, Inc. Enters Into Definitive Agreement to Acquire the Capstar® portfolio of products from Elanco
January 13 2020 - 8:00AM
PetIQ, Inc. (“PetIQ” or the “Company”) (Nasdaq: PETQ), a leading
pet medication and wellness company, and Elanco today announced
they have executed a definitive agreement under which PetIQ will
acquire Capstar®, the #1 oral over-the-counter (“OTC”) flea
treatment product in the United States, from Elanco Animal Health,
Inc. (“Elanco”) (NYSE: ELAN). The $95 million cash transaction has
been unanimously approved by PetIQ’s and Elanco’s Board of
Directors. PetIQ expects that this acquisition will be immediately
accretive to earnings following the closing and thereafter. The
closing of the transaction is contingent, and expected to occur,
upon approval of the acquisition under a consent order issued by
the U.S. Federal Trade Commission.
The Capstar portfolio is comprised of seven
SKUs, including three private label SKUs which are sold under the
Capaction® brand. Capstar® is an oral tablet for the treatment of
flea infestations on dogs, puppies, cats and kittens and is
currently the best-selling oral OTC flea treatment product in the
United States. Additionally, Capstar® is the only oral OTC product
for cats in the market today.
Cord Christensen, PetIQ’s Chairman and Chief
Executive Officer commented, “We are excited to further enhance our
manufactured product business with the addition of Capstar’s
industry leading animal health product portfolio. This accretive,
strategic bolt-on transaction is a natural fit with our pet health
and wellness platform. We have been distributing the Capstar brand
for several years and have a deep appreciation for the trust that
pet parents have in their flea treatments, which is demonstrated by
their very attractive position. We believe that PetIQ is well
positioned to support and grow Capstar across sales channels
long-term.”
Strategic and Financial
Benefits
PetIQ believes the combination will provide the
following strategic and financial benefits:
- Further Diversifies and Expands PetIQ’s Manufactured
Pet Health and Wellness Branded Product Offerings: The
addition of the Capstar portfolio complements PetIQ’s existing
portfolio of manufactured products, which was recently expanded by
the addition of products sold under the brands of Perrigo Animal
Health. The acquisition further supports the Company’s product
category, brand, and sales channel diversity with a focus on
accessible and affordable, high-quality flea infestation
treatments.
- Enhances Product Segment Financial Profile with
High-margin Manufactured Product Line: The Capstar
portfolio will represent the highest margin business within the
PetIQ product segment. The transaction and related assets are
isolated to the products, brands and associated registrations and
does not include any physical manufacturing assets or incremental
labor. The transition of the asset is supported by a 24 month
manufacturing and service agreement with Elanco, who will
systematically assist PetIQ in the transition of production to
PetIQ’s state of the art facility in Omaha, NE.
Transaction Details
The assets associated with the Capstar portfolio
will be acquired for $95 million in cash. PetIQ will own the
complementary product portfolio of Capstar’s highly recognized
brand allowing for PetIQ to realize short, mid and long term value
creation putting PetIQ in a more competitive position in
anti-parasitics, a key growth segment of the animal health
industry. The Company plans to finance the transaction within
PetIQ’s existing debt facilities and cash on hand. Pro forma for
the transaction, including the annualized EBITDA contribution of
Capstar, PetIQ expects an immaterial change to its net
debt-to-Adjusted EBITDA leverage ratio. PetIQ remains committed to
reducing its leverage through a combination of organic growth and
free cash flow.
About PetIQ
PetIQ is a leading pet medication and wellness
company delivering a smarter way for pet parents to help their pets
live their best lives through convenient access to affordable
veterinary products and services. The company engages with
customers through more than 60,000 points of distribution across
retail and e-commerce channels with its branded distributed
medications, which is further supported by its own world-class
medications manufacturing facility in Omaha, Nebraska. The
company’s national service platform, VIP Petcare, operates in over
3,400 retail partner locations in 41 states providing cost
effective and convenient veterinary wellness services. PetIQ
believes that pets are an important part of the family and deserve
the best products and care we can give them. For more information,
visit www.PetIQ.com.
Forward Looking Statements
This press release contains forward-looking
statements that involve risks and uncertainties, such as statements
about our plans, objectives, expectations, assumptions or future
events. In some cases, you can identify forward-looking statements
by terminology such as "anticipate," "estimate," "plan," "project,"
"continuing," "ongoing," "expect," "believe," "intend," "may,"
"will," "should," "could" and similar expressions. Forward-looking
statements involve estimates, assumptions, known and unknown risks,
uncertainties and other factors that could cause actual results to
differ materially from any future results, performances, or
achievements expressed or implied by the forward-looking
statements. Forward-looking statements should not be read as a
guarantee of future performance or results, and will not
necessarily be accurate indications of the times at, or by, which
such performance or results will be achieved. Forward-looking
statements are based on information available at the time those
statements are made or management's good faith belief as of that
time with respect to future events, and are subject to risks and
uncertainties that could cause actual performance or results to
differ materially from those expressed in or suggested by the
forward-looking statements. Important factors that could cause such
differences include, but are not limited to, our ability to
successfully grow our business through acquisitions; our dependency
on a limited number of customers; our ability to implement our
growth strategy effectively; disruptions in our manufacturing and
distribution chains; competition from veterinarians and others in
our industry; reputational damage to our brands; economic trends
and spending on pets; the effectiveness of our marketing and trade
promotion programs; recalls or withdrawals of our products or
product liability claims; our ability to manage our manufacturing
and supply chain effectively; disruptions in our manufacturing and
distribution chains; our ability to introduce new products and
improve existing products; our failure to protect our intellectual
property; costs associated with governmental regulation; our
ability to keep and retain key employees; our ability to sustain
profitability; and the risks set forth under the “Risk Factors” of
our Annual Report on Form 10-K for the year ended December 31, 2018
and other reports filed from time to time with the Securities and
Exchange Commission.
Additional risks and uncertainties not currently
known to us or that we currently deem to be immaterial also may
materially adversely affect our business, financial condition or
operating results. The forward-looking statements speak only as of
the date on which they are made, and, except as required by law, we
undertake no obligation to update any forward-looking statement to
reflect events or circumstances after the date on which the
statement is made or to reflect the occurrence of unanticipated
events. In addition, we cannot assess the impact of each factor on
our business or the extent to which any factor, or combination of
factors, may cause actual results to differ materially from those
contained in any forward-looking statements. Consequently, you
should not place undue reliance on forward-looking statements.
CONTACT:
Investor Relations Contact: |
Media Relations Contact: |
ICRJeff Sonnek646-277-1263 jeff.sonnek@icrinc.com |
ICRCory Ziskind646-277-1232cory.ziskind@icrinc.com |
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