VCA takes majority stake in Companion Animal Practices

Animal healthcare provider VCA Inc. completed the acquisition of an 80% majority stake in veterinary clinic operator Companion Animal Practices, North America (CAPNA). Structured as a majority equity buyout, the transaction price represented an enterprise valuation multiple of 10x–18x expected 2016 EBITDA, including the net present value of anticipated future tax benefits estimated at $116 million that will positively impact VCA's operating cash flows over a 15-year period. Initially announced on February 29, 2016, and officially closed on May 2, 2016, the build-up transaction reinforces VCA's clinical network across North America. At transaction closing, CAPNA operated a network of 56 free-standing animal hospitals across 18 U.S. states, supported a workforce of over 2,000 employees, and projected full-year 2016 annual revenues of approximately $200m. With the integration of CAPNA's practices, VCA expanded its operating footprint to 762 veterinary hospitals owned, operated, or managed throughout the United States and Canada. Post-acquisition, CAPNA continues to run as an independent business unit under the leadership of President Dennis Law, leveraging VCA's scaled administrative infrastructure, systems, and financial resources. In structuring the transaction, RBC Capital Markets served as exclusive financial advisor to CAPNA, with Gibson, Dunn & Crutcher acting as target legal counsel, while Akin Gump Strauss Hauer & Feld represented VCA as legal counsel. The acquisition is accretive to VCA's adjusted non-GAAP diluted earnings per share, delivering an estimated $0.03 to $0.04 in EPS accretion for fiscal year 2016, excluding transaction-related fees, integration expenses, and intangible asset amortization.