(Reuters) - Medicines distributor AmerisourceBergen Corp (ABC.N) will buy MWI Veterinary Supply Inc MWIV.O for about $2.5 billion to enter the fast-growing animal health products distribution business as pet ownership rises in the United States.
MWI shares rose 8 percent to $189.90, just shy of the offer price of $190 per share, while AmerisourceBergen shares were down about 1.4 percent at $91.68.
The $22-billion industry for animal medicines and vaccines is expected to grow 5.7 percent per year from 2011 to 2016, according to a report by Technology Acceleration Partners, a private capital development firm targeting animal health, food and agriculture ventures.
MWI’s distributes products for livestock and companion animals such as dogs, cats and horses across the United States and United Kingdom. It had 2014 revenue of $2.98 billion.
“Animal health is a growing market in the U.S. and internationally, and is a logical extension of our pharmaceutical distribution and services businesses,” AmerisourceBergen Chief Executive Steven Collis said in a statement.
The animal health industry had been in the spotlight with activist investor William Ackman taking a stake in market leader Zoetis Inc (ZTS.N) in November.
Eli Lilly and Co’s (LLY.N) Elanco jumped to the No.2 position when it bought Novartis AG’s NOVN.VX animal health business for $5.4 billion in April last year.
The MWI deal will help AmerisourceBergen – which counts U.S. managers of drug benefits Walgreen (WBA.O) and Express Scripts (ESRX.O) as its biggest customers – move into new but high-growth market, ISI Evercore analyst Ross Muken wrote in a note.
AmerisourceBergen said the deal, approved by the board of both companies, is expected to add about 8 cents to adjusted earnings in fiscal 2015.
The deal, expected to close during the March quarter, will be financed using cash and long-term debt, AmerisourceBergen said.
AmerisourceBergen’s financial adviser is BofA Merrill Lynch and Cravath Swaine & Moore LLP is legal counsel.
J.P. Morgan is MWI Veterinary’s financial adviser and Dechert LLP is legal adviser.
Reporting by Ankur Banerjee in Bengaluru; Editing by Savio D'Souza