The FTC and attorneys general from 13 states filed suit to block Covetrus's $3.5 billion acquisition of MWI Animal Health from Cencora, arguing the deal would raise costs for clinics and pet owners.
The U.S. Federal Trade Commission and attorneys general from 13 states filed a lawsuit on Nov. 13 to block Covetrus's $3.5 billion purchase of MWI Animal Health, the veterinary distribution unit of Cencora, Inc.
The FTC filed its complaint in the U.S. District Court for the Southern District of New York. The states joining as co-plaintiffs are Arizona, Arkansas, California, Colorado, Maine, Michigan, Minnesota, Nebraska, New York, North Carolina, Ohio, Oregon and Texas. The defendants include Covetrus, its owners Clayton Dubilier & Rice and TPG, its parent CVET TopCo, Cencora and MWI.
The FTC alleges the deal would combine the two largest distributors of veterinary medicines and clinic supplies in the U.S., eliminating direct competition between the companies. The agency says Covetrus and MWI compete aggressively on price, using discounts and rebates to win business from independent veterinarians and large clinic chains. The FTC argues the merger would create highly concentrated markets in distribution to veterinary clinics and in distribution to large corporate accounts such as multi-clinic chains, and that the transaction would raise costs for clinics and pet owners. The Commission voted 2-0 to authorize staff to seek a permanent injunction.
"These two companies are engaged in fierce head-to-head competition, and Covetrus wants to eliminate its closest competitor rather than compete for veterinary clinic customers," said Daniel Guarnera, director of the FTC's Bureau of Competition.
Covetrus said the lawsuit "does not reflect an accurate understanding of how veterinarians actually buy the products they need," that the FTC relies on a narrow and outdated view of the market, and that it is fully prepared to defend the deal in court. Cencora did not immediately respond to Reuters' request for comment.
Cencora agreed on Feb. 17 to merge MWI with Covetrus at an enterprise value of $3.5 billion. At closing it would receive $1.25 billion in cash plus equity in CVET TopCo: $800 million in perpetual payment-in-kind preferred units and $1.45 billion in common units, about 34.3% of the combined company. Cencora shares rose about 2% in midday trading. J.P. Morgan analysts said they did not expect the challenge to affect Cencora's forecast and that if the sale is blocked, Cencora would likely look for alternative MWI transactions.
Sources
This article was drafted with AI assistance and checked against the sources above. Company claims are reported as claims. Cover image is AI-generated.
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