Pfizer acquires Wyeth, sells many of the Fort Dodge products to Boehringer Ingelheim, and returns to Virbac the distribution rights for its equine tapeworm parasiticides. Boehringer Ingelheim gears up to incorporate a new set of products, and Virbac grants distribution rights to the parasiticides to Bimeda. Meanwhile, Henry Schein and Butler Animal Health Supply join forces to create a $1.3 billion distributor, Butler Schein Animal Health. A month in the life of the veterinary supply chain.

What is the long-term impact of all these changes on Veterinary Advantage readers? We went straight to the sources to find out the answers. Following is what we learned.

Butler Schein won’t stop growing

Two strong organizations, a bunch of years of experience, and the determination to get things right without undue delay should make the marriage of NLS Henry Schein and Butler Animal Health Supply a strong and vibrant one, according to newly named chairman and CEO of Butler Schein Animal Health, Kevin R. Vasquez.

Speaking with Veterinary Advantage in mid-December, Vasquez predicted that the details of the merger – including consolidation of the sales force, distribution centers, product lines, etc. - should be worked out in the near future. “We’re all doing the deep dive now,” he said. “We will be responsible as we go forward in determining what is best for our customers, our employees and our business, as we lay out a plan in a competently aggressive fashion. We know we can’t linger in this process, but also that we have to make intelligent, substantive and caring decisions.”

The bottom line, Vasquez suggested, is not so much cutback or consolidation as it is growth. To wit:

• A combined company that is No. 1 in the animal health market, with sales of roughly $1.3 billion (including agency sales). (Minus agency sales, the total is approximately $850 million.)
• A combined sales force of approximately 500 reps, representing both field reps and telesales reps.
• A combined customer base of approximately 25,000 clinics.
• An expanded, strengthened equipment sales and service offering (an area in which Henry Schein excels).
• An expanded product line. Despite significant overlap (given the focus of both NLS, Henry Schein and Butler on the companion animal market), Henry Schein brings to the table some products that Butler didn’t represent, and vice versa.
• An expanded offering of automated practice management/medical records systems, to be augmented next year with the addition of two new systems.

Needless to say, some questions are lingering. For example, how will the new company, which is to be based in Dublin, Ohio (Butler’s home), bring together Butler’s 16 distribution centers and seven telecenters, and NLS Henry Schein’s seven distribution centers and four telecenters? Also, questions remain about how Butler Schein will move forward with a combined private label program, and what will its relationship be with both Vedco and Clipper Distributing in the future. “Once we determine the right thing to do, we will move expeditiously to bring the companies together under one common culture,” says Vasquez.

No surprise
That NLS Schein and Butler decided to join forces surprised few in the industry. Nor should it have, said Vasquez, who has been with Butler 10 years, most recently as chairman, president and CEO.
“This is something that isn’t unusual for Henry Schein at all,” he said. “They’ve been at the forefront of growth and expansion, organically and through acquisition, for a number of years.” In fact, Henry Schein acquired NLS Animal Health, a $150 million animal health distributor based in Owings Mills, Md., in mid-2006. Since becoming a publicly owned company in 1995, Henry Schein’s animal health business has grown significantly in Europe, with sales in the last 12 months of approximately $620 million. Henry Schein Animal Health International serves more than 18,000 customers and has operations in eight countries.
“So when Henry Schein’s management team looked at the U.S. market, it was not unusual for them to say, ‘How can we develop a strategy where we can become the No. 1 player in the U.S. veterinary distribution space?’” he said. “It was natural for them to seek and find a proper partner.”
Butler, meanwhile, was ready for a move as well. Owned by Oak Hill Capital Partners, a private equity firm; as well as The Ashkin Family Group, Jericho, N.Y., Butler had considered issuing an initial public offering. “But the markets changed on us,” explained Vasquez. “We didn’t think going public was a good strategic move, given the financial markets.” But the company had been in touch with Henry Schein (and other potential suitors) for years. “Being the market leader created a lot of interest in the company,” he said. Henry Schein and Butler “continued to talk and say, ‘Is there any common ground? Can we merge these companies and become more valuable partners to our vendors and customers, and create a world class, value added animal health distribution company?’” They ultimately decided the answer was “yes.”

Terms of the agreement call for Butler Schein Animal Health to be 50.1-percent-owned by Henry Schein and 49.9-percent-owned by Oak Hill and The Ashkin Family Group.