Patterson to Sell for $4.1B to Healthcare Investor

Patterson Companies Announces $4.1 Billion Sale to Patient Square Capital

According to a report published on MedTech Dive, Patterson Companies, a distributor specializing in dental and animal health products, has agreed to sell to healthcare investment firm Patient Square Capital for approximately $4.1 billion. The deal will take Patterson private at a purchase price of about $31.35 per share in cash. Before the announcement, Patterson’s stock closed at $23.11, but following the news, shares rose by more than 34% on Wednesday.

This transaction follows Patterson’s recent announcement that it was exploring strategic alternatives after experiencing a one-third decline in profit during its fiscal second quarter, as reported by the Minnesota Star Tribune.

Financial Performance and Business Overview

St. Paul, Minnesota-based Patterson Companies reported total sales of $6.57 billion in its fiscal year ending in April. Dental products account for approximately 38% of its total revenue, while the company also distributes veterinary equipment, including imaging machines.

During its latest quarterly earnings call, Patterson’s executives identified two key challenges impacting financial performance: the Change Healthcare cyberattack, which affected revenue and profit in its dental division, and a slowdown in veterinary clinic traffic. The company reported a net income of $26.8 million for the quarter, a significant drop of approximately one-third compared to the previous year.

Analysts’ Reactions and Market Implications

Market analysts have responded to the acquisition with cautious optimism. Evercore ISI analysts noted that while the timing of the deal “came as a bit of a surprise,” they viewed it as a positive development in light of Patterson’s financial performance. The acquisition price represents a 49% premium to the company’s 30-day volume-weighted average price per share before the strategic alternatives announcement.

William Blair analyst Brandon Vazquez remarked in a research note, “We believe this is a solid takeout multiple for Patterson and would be surprised to see higher bidders come forward in the 40-day shopping period.”

The agreement includes a 40-day “go-shop” period, during which Patterson can explore alternative proposals from other potential buyers. However, Evercore analysts suggested the likelihood of competing bids is low due to possible antitrust concerns or differing strategic priorities among other firms. They also indicated that the deal is unlikely to face regulatory hurdles.

Patient Square Capital’s Strategy and Acquisition Financing

Patient Square Capital has a history of investing in underperforming assets and working to improve their operations. The firm’s recent acquisition of biopharma solutions provider Syneos Health has been cited as an example of its turnaround strategy.

The acquisition of Patterson Companies will be financed through a combination of debt and equity financing from Patient Square Equity Partners. Patterson’s board of directors has already approved the transaction.

Next Steps for the Acquisition

The transaction is expected to close in Patterson’s fiscal fourth quarter, which concludes in April 2025. The completion of the deal remains subject to shareholder approval, regulatory clearance, and other customary closing conditions.

Patterson’s sale to Patient Square Capital marks a significant shift in the company’s trajectory as it navigates challenges in both the dental and veterinary markets. As the process moves forward, stakeholders will be closely watching for any potential competitive bids or regulatory developments.