-Zoetis to buy veterinary diagnostics firm Abaxis for $1.9 bln
(Corrects typo in paragraph 3)
* Zoetis says diagnostics should grow faster than animal
* Much less competition in overseas markets vs U.S. - Zoetis
* Abaxis shares rise 16 pct, surpass offer price of
By Tamara Mathias
May 16 (Reuters) - Top animal health company Zoetis Inc
will buy Abaxis Inc for $1.9 billion, looking
to capture a bigger slice of the fast-growing market for
diagnostics services that cater to household pets and farm
The deal announced Wednesday reflects Zoetis' expectation
that the diagnostics category will grow at a faster pace than
the broader animal health industry.
Abaxis — which makes blood and urine tests to predict,
detect and treat diseases such as heartworm, Lyme disease or
tick-borne infections — will also help its New Jersey-based
acquirer bolster its presence in overseas markets.
Zoetis faces much lesser competition internationally than in
the United States, its Chief Executive Officer Juan Alaix said
on a conference call with analysts.
"The characteristic of patients in animal health is that
they don't speak. So in our industry, almost every animal
getting into clinics needs to have a diagnostic test," Alaix
The veterinary diagnostics market worldwide is expected grow
to $3.6 billion in 2022 from $2.3 billion in 2017, according to
research firm MarketsandMarkets https://www.marketsandmarkets.com/PressReleases/veterinary-diagnostics.asp.
By contrast, the global animal medicines and vaccines market
is worth around $30 billion, according to veterinary consultancy
Much of Zoetis' revenue is driven by its animal dermatology
business, and diagnostics contribute just under 1 percent of its
overall annual revenue of more than $5 billion.
On Wednesday, Zoetis' shares fell 0.5 percent, while shares
of IDEXX Laboratories Inc, Abaxis' biggest competitor,
fell 3.7 percent.
"We believe this is a good deal for Zoetis although the
valuation seems high," BMO Capital Markets analyst Alex Arfaei
Shares of Abaxis rose as much as 16 percent to an all-time
high of $83.24, inching past Zoetis' all-cash offer price of $83
At seven times Abaxis' annual revenue, the price Zoetis is
paying is already "pretty steep," said C.L. King and Associates
analyst David Westenberg. "If there's another bidder, I don't
think Zoetis would go any higher," he said.
However, should there be a rival offer, the companies most
likely to make a bid would be Eli Lilly and Co's animal
health unit Elanco or candy and pet food company Mars Inc,
Other possible bidders include dental supply firms Henry
Schein Inc and Patterson Companies Inc, which
also have animal health divisions, he added.
Zoetis plans to fund the acquisition through cash and new
debt. It expects the deal to close before the end of the year
and Abaxis to add to its earnings in 2019.
(Reporting by Tamara Mathias in Bengaluru; Editing by Anil
D'Silva and Sai Sachin Ravikumar)
First Published: 2018-05-16 13:06:55
Updated 2018-05-16 19:38:38
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