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MWI Veterinary Supply Inc. (MWIV - Analyst Report) recently acquired all the assets of U.S.-based key competitor IVESCO Holdings for $67.5 million along with net working capital adjustment of $11.2 million. This initiative is part of a concerted effort by MWIV to strengthen its business in the domestic market.

MWI Vet, slated to release its fiscal-2013 results on Nov 7, expects an impact of $1.0 million of pretax acquisition-related expenses on its fourth-quarter net income. Nevertheless, the company expects $400 million of annual revenues from IVESCO. Additionally, this acquisition is also expected to be slightly accretive to MWI Vet’s fiscal-2014 performance, after adjusting for acquisition-associated expenditure and integration costs.

This marks another strategic acquisition for MWI Vet. The company constantly has its eye on accretive buyouts. We believe that consolidation efforts in the veterinary distribution business should help the company gain market share with consequently greater pricing power against other players.

According to the company, acquisition-related expenditure amounts to roughly $1.2 million in the fiscal fourth quarter (ending Sep 30, 2013). The impact of this unanticipated expenditure was naturally not included in MWI Vet’s EPS guidance for fiscal 2013.

As a value-added distributor of animal health products in Springdale, AR, INVESCO appears to be a strategic fit for MWI Vet. Presently, IVESCO’s five business platforms – mixed animal practice veterinarians, poultry integrators, swine integrators, dealers and cattle, serve more than 6,000 customers in the U.S. IVESCO distributes over 25,000 different products sourced from 500 manufacturers.

Per management, the acquisition will boost MWI Vet’s foothold in the production animal market. Following the takeover, the company will be in a position to offer an enhanced product portfolio, with improved supply chain performance, to its vendors and customers. Furthermore, the addition of IVESCO’s complementary business comes at a small premium over net tangible assets for MWI Vet.

We are optimistic that MWI Vet should gain competitive advantage on the basis of economies of scale, post-acquisition. The enhanced financial profile should in turn, boost the company’s growth profile going forward.

Currently, MWI Vet looks like an attractive pick as it carries a Zacks Rank #2 (Buy). Other stocks that warrant a look are Align Technologies Inc., (ALGN - Analyst Report), Cardinal Health, Inc. (CAH - Analyst Report) and Mindray Medical International Ltd (MR - Analyst Report). All these stocks also carry a Zacks Rank #2.

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