One of Minnesota’s Fortune 500 companies, Patterson Cos., to go private in $4.1B sale

The struggling Patterson Cos. will be sold to a health-focused private equity firm for $4.1 billion.

Menlo Park, Calif.-based Patient Square Capital will pay shareholders of the Mendota Heights-based supplier of dental and veterinary supplies $31.35, the firms announced Wednesday. That’s a 49% premium on the average 30-day price of Patterson stock before last week’s announcement that Patterson was reviewing strategic alternatives.

“Today’s announcement marks an exciting next step in Patterson’s evolution and delivers immediate and certain value for our shareholders and positions us to continue to invest in serving our customers and driving growth,” said Patterson Chief Executive Don Zurbay in a news release.

The markets responded positively. As the Nasdaq composite opened, Patterson shares surged Wednesday to close at $31.40, up nearly 36%.

The deal is expected to close by the end of April, pending regulatory and shareholder approvals and customary closing conditions. The deal includes an option for the Patterson board and its advisers to continue searching for a competing offer over the next 40 days.

Patient Square has a portfolio of 11 companies and $11 billion in assets under management as of Sept. 30. Should Patient Square complete the deal, Patterson would become a private company and its shares would stop trading on Nasdaq. The news release said the company headquarters would remain in Mendota Heights.

“I have closely followed Patterson for decades and long admired the value the company provides to partners and customers,” said Jim Momtazee, Patient Square’s managing partner, in a news release. “Patient Square is excited to work closely with management on the next chapter of growth for the business building on its long and proud legacy.”

Patterson Companies’ annual revenue for its fiscal year ending April 30 was $6.6 billion split between its two main business segments, dental and animal health. The dental segment produced about 30% of total revenue and animal health 68%.

Founded in 1877 in Milwaukee to supply dental and medical supplies, Patterson moved its headquarters to Minnesota in 1891. For much of its history, Patterson distributed dental and medical supplies and equipment, but it acquired Webster Veterinary Supply in 2001 and then acquired Animal Health International in 2015 for $1.1 billion.

Patterson is unique among its dental and medical products distributor peers, such as Henry Schein and Benco Dental, which mainly supply medical and dental offices. Today, Patterson’s animal health segment, which includes supplies, equipment and services for pets and also production animals, is larger than the company’s dental business.

But the company has been struggling financially, especially since the pandemic. It announced last week its second quarter earnings dropped by one-third year over year.

While the go-shop period represents an opportunity for a competing bid to be found, analysts who cover Patterson think it is unlikely to find a better offer.

“There is certainly potential for another bid to come, but given the recent trading valuation and general questions on near-term dental market demand, we see the multiple paid for the transaction as reasonable and thus view any meaningful ‘topticking’ bid as unlikely,” wrote Michael Cherney, an analyst with Leerink Partners in an investor note this morning.