U.S. FTC sues to block Cencora veterinary unit sale to Covetrus
Federal antitrust scrutiny is intensifying around consolidation in the veterinary supply market as regulators move against Cencora's planned divestiture of MWI Animal Health. The challenge targets a $3.5 billion transaction that the government says would leave veterinary clinics and pet owners facing higher costs across the U.S.
Highlights
- The U.S. FTC and 13 state attorneys general filed a lawsuit to block Cencora's $3.5 billion sale of MWI Animal Health to Covetrus, citing antitrust concerns.
- Regulators argue the deal would eliminate direct price competition in veterinary product distribution, negatively impacting independent veterinarians and clinic chains.
- J.P. Morgan analysts expect no immediate impact on Cencora’s forecast, and Cencora shares rose about 2% despite increased execution risk from the lawsuit.
Antitrust challenge centers on veterinary distribution competition
As reported by Reuters, citing the Federal Trade Commission, the agency filed a lawsuit on Friday in the U.S. District Court for the Southern District of New York to stop Cencora's proposed sale of MWI Animal Health to privately held Covetrus. The case is joined by attorneys general from 13 states.The FTC says the proposed transaction would combine the two largest distributors of veterinary medicines and clinic supplies in the U.S., eliminating direct competition between the companies. Regulators argue that Covetrus and MWI now compete aggressively on price, using discounts and rebates to win business from independent veterinarians and large clinic chains.
Cencora agreed in February to sell MWI to Covetrus for $3.5 billion. Cencora and Covetrus do not immediately respond to Reuters requests for comment.
Implications for Cencora and the animal health market
For Cencora, the lawsuit introduces execution risk around a planned portfolio move, though early market reaction appears limited. The company's shares are up about 2% in midday trading.J.P. Morgan analysts say they do not expect the FTC challenge to hurt Cencora's forecast. The brokerage expects the company to continue arguing the deal's strategic merits, but says Cencora would likely look for alternative transactions involving MWI if the sale is ultimately blocked.
This adds to earlier discussion around the UK antitrust test facing the AkzoNobel-Axalta merger in vehicle refinish coatings.
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