A Look at the Veterinary Supply Segment
Veterinary segments may contain hidden value for both Patterson and Schein.
Patterson Companies' (PDCO) (FV: $36) Webster Veterinary, Henry Schein's (HSIC) (FV: $63) Butler Animal Health Supply, and pure play MWI Veterinary Supply (MWIV) together represent a 75% share of the addressable $3 billion veterinary supply market. Patterson's Webster unit has been a mainstay for the company over the years, contributing around 20% in revenue to total operations. Schein stepped up its commitment to its veterinary segment at the end of 2009, when it spent around $350 million to acquire a 50.1% stake in Butler, a significant purchase that took sales in the firm's animal health segment to $889 million in 2010 from $240 million in 2009, a 270% increase.
Patterson and Henry Schein have a significant and primary presence in dental supply, and we believe there are several similarities between their veterinary and dental businesses. Both markets are fairly fragmented, and customers typically use multiple suppliers and keep inventory on hand fairly low. One area where the two segments differ is with respect to the makeup of products in the sales channel. While the average dental distributor generates roughly 55%-60% of its sales in consumables and around one third from dental equipment, vet distribution sales are generated almost exclusively by consumables--roughly 95% for Webster in fiscal 2010.
Bill Buhr does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.