VCA
Industryweek 12739 Vca 1

Mars Expands in Pet Care with $7.7 Billion Purchase of VCA

Jan. 9, 2017
Mars had already been building out its pet business, including both food and hospital care. The company owns Banfield Pet Hospital and BluePearl Veterinary Partners, and it’s acquired pet-food brands from Procter & Gamble Co.

Candy giant Mars Inc., facing a slowdown in packaged food, is making a bigger bet on a booming industry: pet care.

The maker of M&Ms and Snickers agreed to buy the animal-hospital chain VCA Inc. for about $7.7 billion on January 9 -- not including debt -- expanding on its existing veterinary-care business. Mars will pay $93 a share in cash, a 31% premium to VCA’s closing price of $70.77 on January 6.

The acquisition turns Mars into a dominant company in corporate-owned pet hospitals, an area that’s exploded in recent years -- helped by Americans treating their pets more like family members. It also could help bolster Mars’s current pet brands, including Pedigree and Whiskas.

At a time when human food isn’t growing as quickly, the deal may make more sense for Mars than buying another snack business, said Ken Shea, an analyst at Bloomberg Intelligence. “They see growth and they see diversity,” he said. “Why double down on food when it’s not growing that fast?”

The total value for the deal is about $9.1 billion, including $1.4 billion in outstanding debt. Shares of VCA, which trade under the ticker WOOF, surged as much as 29% to $91.03 on January 9 after the transaction was announced.

Closely held Mars had already been building out its pet business, including both food and hospital care. The company owns Banfield Pet Hospital and BluePearl Veterinary Partners, and it’s acquired pet-food brands from Procter & Gamble Co. VCA, meanwhile, operates almost 800 animal hospitals in the U.S. and Canada.

Grocery Slowdown

The deeper push into the pet business by Mars comes as large packaged-food companies are struggling with flagging sales. Changing consumer tastes, particularly a desire for less processed foods, has made it difficult for the companies that have dominated grocery-store shelves. Efforts to reduce sugar intake have struck an additional blow to candy makers such as Mars. That’s added pressure to diversify their portfolios.

Spending on pets has surged in the U.S., fueled by the “humanization” of dogs and cats. Americans spent $35 billion on veterinary care in 2015. VCA, a pioneer in the field, has grown by buying up hundreds of veterinary hospitals -- an approach that’s now being adopted by rival companies.

Mars, based in McLean, Va., expects the VCA deal to be completed in the third quarter.

“VCA is a leader across pet health care and the opportunity we see together -- for pets, pet owners, veterinarians and other pet-care providers -- is tremendous,” Mars CEO Grant Reid said.

By Zachary Tracer and Craig Giammona

Popular Sponsored Recommendations

Powering Up Productivity: The Transformative Power of AP Automation in Manufacturing

Oct. 25, 2023
Discover how AP Automation is revolutionizing the manufacturing industry, driving efficiency, cost savings, and security. In today's world, automation is the key to staying competitive...

Food and Beverage 2024 Trends and Outlook for North America

Oct. 29, 2023
Ready to hear what 200 of your peers said are the top challenges and opportunities in 2024? Don’t fall behind. Uncover actionable insights to better prepare for 2024 in this whitepaper...

Process Mining For Dummies

Nov. 19, 2023
Here it is. Everything you need to know about process mining in a single book, written in the easy-to-understand, hard-to-forget style that ‘For Dummies’ manages so effortlessly...

Turning Your Frontline Workforce into a Competitive Advantage: A Comprehensive Guide

Sept. 19, 2023
In this guide, we'll explore how manufacturers are using digital technologies to preserve the bottom line and maintain growth by enabling and empowering their #1 asset - their...

Voice your opinion!

To join the conversation, and become an exclusive member of IndustryWeek, create an account today!