The Federal Trade Commission and 13 states sued to block Covetrus Inc. from buying MWI Animal Health, a roughly $3.5 billion deal that would combine the two biggest suppliers of drugs, vaccines and equipment to American veterinary clinics.
The complaint, filed Friday in the U.S. District Court for the Southern District of New York, names Covetrus and its private-equity owners, Clayton, Dubilier & Rice and TPG Inc., along with MWI. Covetrus agreed on March 18 to buy MWI from drug distributor Cencora Inc. The states joining the case are Arizona, Arkansas, California, Colorado, Maine, Michigan, Minnesota, Nebraska, New York, North Carolina, Ohio, Oregon and Texas.
Two of three national suppliers
Regulators argue the veterinary distribution business already runs through three national players: Covetrus, MWI and Patterson Veterinary. According to the Nebraska attorney general, the merger would give the combined company more than half of the national market, and smaller regional distributors lack the scale to keep it in check. The states say the two companies now compete clinic by clinic through price matching, volume rebates on drugs and service contracts, and that removing that rivalry would raise costs that clinics pass on to pet owners.
California officials said veterinary care costs have climbed about 60% since 2014 and rose another 5.7% in the year through August. The coalition also argues clinics rely on having two large suppliers to work around shortages of vaccines and prescription drugs.
Covetrus vows to fight
Covetrus said the lawsuit misreads how veterinarians actually buy supplies. The Portland, Maine, company said practices routinely buy directly from manufacturers, use regional distributors and shop on online marketplaces that more than 60% of U.S. practices now use and that connect them to more than 40 distributors. It called the agency view of the market narrow and outdated and said it is fully prepared to defend the deal in court. Cencora did not immediately comment.
The challenge lands a day after Clayton, Dubilier & Rice and GTCR walked away from talks to take Global Payments private, capping a difficult week for the buyout firm.
A North Carolina angle
North Carolina Attorney General Jeff Jackson announced the state role in Raleigh, pointing to more than 3 million households in the state with pets. HERE Raleigh reported on the local stakes, including demand for low-cost care at the Wake County SPCA. For more local business coverage, see HERE Raleigh Business.
Section: More Outer Banks NC business news
