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Swedencare - Building a pet powerhouse

24 september 2020

Continuing the M&A journey through 2 acquisitions
Paying 10x and 12x EV/EBITDA
Proforma calculation point to ~44% ‘21e EPS accretion
Acquisition of Nutravet and Animal Pharmaceuticals
This evening, Swedencare announced the acquisitions of two companies, Nutravet and Animal Pharmaceuticals. The acquisitions are financed by cash and a share issue. Nutravet is a British vet exclusive company on a roll-out journey in Europe together with a leading vet-chain. The company has a broad product portfolio including products for dog, cat and horse health. Animal Pharmaceuticals (“AP”) is an American company very similar to Stratford Pharmaceuticals, the acquisition made during the summer. AP is strong within dermatology and sells through its own brand and private label. In our view, synergies are most apparent in the AP acquisition, where purchasing and organisational synergies with Stratford should be possible. Furthermore, Swedencare now has access to the three largest distributors in the US (two from Stratford, one from AP), creating significant revenue synergy opportunities with the ProDen Plaqueoff brand.

~44% ‘21e EPS accretion with constant financials
Nutravet lies at EBITDA margins of 51.5% and AP at 34.3%, to be compared to our forecasted 28.4% ‘21e for SECARE. Assuming no synergies or growth for the two acquisitions during H2’20 or 2021, the acquisitions would mean an accretion to our ‘21e Sales, EBITDA and EPS by 40%, 61% and 44%, respectively.

Increasing US exposure, Plaqueoff exposure down to 40%
There are multiple interesting points with these acquisitions. 1) The acquisitions approached Swedencare about being acquired. We can imagine this helped acquisition multiples stay low. If this trend continues, we see no reason why the M&A journey should stop here. 2) SECARE continues to increase the exposure towards the US, the largest pet market globally, where the average spend per pet is double the one in Europe. 3) On the same calculation as in the second paragraph, the Plaqueoff exposure is now down to ~40%. Hence, the 2021 patent risk has decreased significantly.

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