VCA, which operates the largest network of pet hospitals in the country, announced on Monday that Henry Schein Inc. will acquire a majority interest in VCA’s subsidiary Vetstreet Inc., a provider of health information analytics.
“We loved the management team, we still love the business, but we think they’ll be able to grow much quicker than being alone with us,” said Chief Financial Officer Tomas Fuller. “They’ve had a lot of services we’ve benefited from and we thought we could help propel them, but things didn’t work out quite as well as we hoped.”
Vetstreet has been owned by VCA since 2011. It operates an information management platform that stores data on pets.
Despite the divestiture, Fuller emphasized that VCA remained optimistic about Vetstreet’s potential. When the transaction closes, Henry Schein will own 80 percent of the software provider, with the remaining interest owned by VCA. Terms of the deal were not disclosed.
“The data is a wealth of information that you can market, but also use to connect with pet owners and educate them on pet health,” Fuller said. A minority interest, Fuller said, will allow VCA to retain a position in the industry.
In a statement, Stanley M. Bergman, chief executive of Henry Schein, said Vetstreet would complement its business of providing health care products and services to veterinarians.
As a result of the transaction, VCA, based in Los Angeles, anticipates it will record a gain of $30 million to $35 million, subject to transaction costs. The company expects to offset the cost of lost earnings by reinvesting the proceeds of the sale in animal hospital acquisitions and share repurchases.
“It will have a small impact on us because it was a small purchase in the beginning,” Fuller said.
In the third quarter, VCA reported its animal hospital revenue had increased approximately 11 percent to $441 million, while its gross profit margin was down to 17.3 percent from 17.5 percent a year earlier.
On Monday, VCA’s shares traded up a little less than 1 percent, hitting $55.31.