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Purchase enhances Zoetis’ presence in veterinary diagnostics and deploys capital in complementary, high-growth segments of animal health industry.
May 16, 2018
Zoetis Inc. and Abaxis Inc. announced May 16 a definitive merger agreement under which Zoetis will acquire Abaxis -- a leader in the development, manufacturing and marketing of diagnostic instruments for veterinary point-of-care services -- for $83 per share in cash, or approximately $2.0 billion in aggregate.
The acquisition is expected to enhance Zoetis’ presence in veterinary diagnostics -- a category of the animal health industry with approximately 10% compound annual growth over the last three years, the announcement said.
Abaxis, founded in 1989 and headquartered in Union City, Cal., is a leading provider of diagnostic instruments and consumable discs, kits and cartridges to the animal health industry. Abaxis reported revenue of $244.7 million for its fiscal year ended March 31 -- an increase of 8% compared to its 2017 fiscal year. Abaxis has more than 580 employees worldwide. Its VetScan portfolio of benchtop and handheld diagnostic instruments and consumables serves a large customer base of veterinary practices in North America and is poised for expansion in international markets, Zoetis said.
“This acquisition brings Zoetis a company that has a proven, competitive diagnostic platform for growth that we can help accelerate in the U.S. and worldwide with our global scale and direct customer relationships in approximately 45 countries,” Zoetis chief executive officer Juan Ramón Alaix said. “Together, we can bring more veterinarian customers a broader range of products that fit into our comprehensive solutions and innovations, from prediction and early detection of disease in animals to prevention and treatment.”
Abaxis chairman and CEO Clint Severson added, “We see a prime opportunity to grow our business as part of Zoetis. We recently invested in expanding operations in Europe, Latin America and the Asia Pacific Region, with 20% of revenue in fiscal year 2018 coming from our international operations. Zoetis has the global presence and direct veterinary customer relationships to deliver greater value to more customers around the world and accelerate the growth of our international operations. This acquisition gives recognition to our record of success and the highly skilled, dedicated employees of Abaxis who helped build our company over the course of nearly three decades.”
The Abaxis VetScan portfolio includes chemistry and hematology diagnostic instruments and companion discs, kits and cartridges, which are consumables that create a recurring revenue stream. Abaxis recently launched the VetScan FLEX4 Rapid Test to detect heartworm, lyme, ehrlichia and anaplasma diseases in dogs, as well as its VetScan Canine Pancreatic Lipase Rapid Test, its UA urine chemistry instrument and the Urine Sediment Analyzer.
Abaxis has a near-term pipeline of products, including an update to the capabilities of its VetScan FUSE, a bidirectional connectivity system that provides integration between Abaxis' point-of-care instruments and veterinary practice management systems worldwide.
Abaxis derived 83% ($201.9 million) of its annual revenue in fiscal 2018 from diagnostic products and services for the veterinary market. Approximately 16% ($38.6 million) of company revenues were generated by sales of its Piccolo portfolio of analyzers and tests for the human medical market. Sales of consumables accounted for approximately 78% ($191.3 million) of fiscal 2018 revenue.
According to Zoetis, the veterinary diagnostics category, which includes reference laboratory and point-of-care diagnostics, is estimated to be valued at more than $3 billion, with compound annual growth of 10% over the past three years. Zoetis said it expects the diagnostics category to continue to grow faster than the overall animal health industry, with growth in the mid- to high single digits, driven by international adoption of point-of-care diagnostic instruments due to rising medicalization rates, increasing standards of veterinary care and the convenience of in-clinic testing.
The transaction is subject to customary closing conditions, including regulatory and Abaxis shareholder approvals. Zoetis expects to complete the acquisition before the end of 2018 and intends to fund the purchase through a combination of existing cash and new debt.
Zoetis anticipates the transaction to have an impact on 2018 reported earnings related to customary closing activities; however, on an adjusted basis, the company does not expect a material impact.
Zoetis is a leading animal health company dedicated to supporting its customers and their businesses. Building on more than 60 years of experience in animal health, Zoetis discovers, develops, manufactures and markets veterinary vaccines and medicines, complemented by diagnostic products, genetic tests, biodevices and a range of services.
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