Patterson offloads medical unit to private equity firm for $715M, boosts focus on animal health

Just two months after hiring Bank of America to explore a selloff of its medical-equipment unit, distributor Patterson Companies ($PDCO) has found a buyer. The Minnesota company announced on Wednesday that it will be selling Patterson Medical to private equity firm Madison Dearborn Partners for $715 million. The deal is expected to close next quarter.

Patterson CEO Scott Anderson

Patterson CEO Scott Anderson says selling the medical business--which primarily markets equipment for use in the rehabilitation market--will free up the company to focus on its other two units, most notably its fast-growing animal health business.

"We believe that we can accelerate returns on invested capital and increase shareholder value by focusing on our closely aligned dental and animal health units," said Anderson in a press release announcing the deal. "By concentrating our efforts, we believe we have created the size and scale necessary to build on our success in our chosen markets."

Just last week, Patterson completed a $1.1 billion acquisition of Animal Health International, effectively doubling the size of its veterinary unit. AHI brought in about $1.5 billion in sales last year, and Patterson expects to realize $20 million to $30 million in cost synergies over the next three years as a result of that deal. The company financed the acquisition with a $1 billion loan and $500 million revolving line of credit.

Patterson plans to use the proceeds from the sale of its medical unit to reduce the debt it incurred in the AHI acquisition, according to the press release.

Patterson has been boosting its efforts in animal health for the past few years--an effort that started with its 2013 acquisition of U.K.-based National Veterinary Services. During the company's fiscal fourth quarter, announced in May, sales in its animal-health unit rose 2.7% to $356 million on a constant-currency basis, thanks to a 32% increase in equipment sales.

Investors seem to approve of Patterson's increased focus on animal health. The company's stock has risen 27% in the past year to $49.50.

- here's the press release

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