Dutch Expansion for Henry Schein

Recently, Henry Schein ( HSIC - Snapshot Report ) entered into an agreement to acquire AUV Veterinary Services B.V, a veterinary products distribution arm of Netherlands-based AUV Group. The financial terms of the deal, which is expected to close in late 2012, remained undisclosed. The deal is anticipated to be marginally dilutive to Henry Schein’s 2012 EPS and accretive thenceforth.

AUV Veterinary Services, which reported sales of €194.2 million ($270.4 million) in fiscal 2011, currently distributes its products to approximately 2,000 large and small animal veterinarians in the Netherlands and Belgium. The company also has a consulting business serving veterinary practices, known as AUV Advies and AUV Academie, an education program for veterinarians.

With its solid cash balance ($147.3 million at the end of fiscal 2011) Henry Schein is focusing on expansion through acquisitions. Earlier in 2011, the company acquired Provet Holdings, the largest veterinary products distributor in Australia in order to tap the Australian veterinary market, which is valued at AUD$620 million ($606 million). Also in the same year, the company acquired California-based Alpha Scientific, a surgical, pharmaceutical and laboratory products distributor. However, financial terms of this acquisition were not disclosed.

Additionally, the company expects to benefit from the company’s long-standing business with the laboratory customers. Henry Schein generated annual revenues of $8.5 billion in fiscal 2011, reflecting a growth of 13.3%. The company’s animal health segment which accounted for 10.9% of the total revenue during the fourth quarter of fiscal 2011, increased 14.9% year over year.

Henry Schein remains optimistic about the AUV Veterinary Services acquisition as it will enable the company to enter the Dutch and Belgian veterinary market, thereby strengthening its European animal health foothold. Immediately after the declaration of the acquisition deal, Henry Schein's share price was up 0.7% to $74.23.

Henry Schein’s portfolio consists of consumable products, small equipment, laboratory products, large dental and medical equipment, equipment repair services, branded and generic pharmaceuticals, vaccines, surgical products, diagnostic tests, infection-control products and vitamins.

Henry Schein continues to experience strong top-line growth and has established its footprint in both domestic and international market in dental, vet, and medical supply distribution.The company’s performance should improve further with the gradual recovery in economic outlook. However, the company faces stiff competition from major players like McKesson Corporation ( MCK - Analyst Report ) and Patterson Companies Inc. ( PDCO - Analyst Report ) . Henry Schein retains a short-term Zacks #3 Rank (Hold), which also corresponds to our long-term ‘Neutral’ recommendation on the stock.