Cencora Merges Animal Health Unit with Covetrus

Drug distributor Cencora (COR) will merge its MWI Animal Health unit with privately held Covetrus in a 3.5 billion transaction that refocuses the company on pharmaceutical distribution.

The deal allows Cencora to monetize its veterinary business while maintaining exposure through equity ownership, potentially boosting returns from its core drug distribution operations.

Key Takeaways

Cencora receives 1.25 billion cash plus 34.3% equity stake
Transaction values MWI Animal Health at 3.5 billion enterprise value
Deal allows focus on core pharmaceutical distribution business

Market reaction & context

The transaction represents a significant strategic shift for Cencora, which has been expanding beyond traditional drug distribution into specialty healthcare markets. The deal comes as pharmaceutical distributors face margin pressure from generic drug pricing and increased competition from retail pharmacy chains.

Covetrus, a veterinary technology and services company, emerged from a 2019 spinoff from Henry Schein and has been seeking to expand its market presence through acquisitions⁸.

Deal structure & financials

Under the definitive agreement signed February 17, Cencora will receive 1.25 billion in cash and approximately 2.25 billion in equity value, representing a 34.3% ownership stake in the combined entity^2,6. The transaction values MWI at an enterprise value of 3.5 billion⁵.

The merger creates a larger veterinary services platform by combining MWI’s distribution capabilities with Covetrus’s technology solutions and pharmacy services. MWI Animal Health serves as a distributor of pharmaceuticals, vaccines, and medical supplies to veterinary practices across North America.

Strategic rationale

The divestiture allows Cencora to streamline operations around its core pharmaceutical distribution business while maintaining upside exposure to the growing veterinary market through its minority stake. The animal health sector has shown resilient growth as pet ownership increased during the pandemic.

For Covetrus, the acquisition provides scale and expanded distribution capabilities that could improve its competitive position against larger players like Patterson Companies and Henry Schein’s veterinary division.

Transaction timeline

The merger is subject to customary closing conditions and regulatory approvals, with completion expected in the coming months. No specific timeline was disclosed in the initial announcements^1,4.

The deal follows earlier reports in February that Covetrus was exploring acquisition opportunities and seeking 3 billion in financing to fund potential transactions⁸.

Not investment advice. For informational purposes only.