Henry Schein buys three Darby companies

Medical and dental giant Henry Schein just got a little bigger. On June 21 the $4.6 billion merchant said it would acquire the direct marketing divisions of Darby Group Cos.’ medical and laboratory supply business for $51.5 million in cash.

The three businesses — Island Dental Co., a distributor of dental merchandise and equipment; Darby Medical Supply, a medical and pharmaceutical supplier; and lab distributor Darby Dental Laboratory Supply — had 2005 sales of approximately $219 million.

Mark Mlotek, executive vice president, corporate business development for Melville, NY-based Schein, says that Island Dental accounted for about 55% of the $219 million in 2005 sales; the medical component made up another 25%; and the laboratory supply business the remaining 20%.

Jericho, NY-based Darby, meanwhile, retains its Darby Dental Supply unit, veterinary supplier Butler-Burns, and OIS, an orthodontics supplier. The deal, expected to close in the third quarter, includes about 100 field sales personnel.

Sales at the privately held Darby are believed to have tumbled during the past few years, and many of its key field salespeople have left for rivals such as Schein and St. Paul, MN-based Patterson Dental. Representatives at Darby did not return several calls requesting an interview.

Island Dental will be integrated into Henry Schein’s Sullivan-Schein dental division. Darby Medical Supply will become part of Henry Schein’s Medical Group. And Darby Dental Laboratory will be part of Schein’s Zahn Dental Laboratory division.

But Schein has no immediate plans to rename the Darby titles. “When we make an acquisition, we concentrate on maintaining the front end of the business so that it’s seamless to the customer,” Mlotek says.

Rather, Schein focuses on integrating a company’s back-office functions, such as accounting and purchasing, after an acquisition, a process that can take up to two years to complete.

Though Mlotek says the Darby businesses will broaden Schein’s merchandise assortment, others see the deal as a way for a Goliath in the market sector to knock out a David.

“This is a move to get a competitor out of a few markets as much as it is to get new customers,” contends Harry Chevan, managing director of New York-based investment bank Gruppo, Levey & Co. “The purchase price seems to be in the realm of valuation of what the market is paying for medical distributors,” he adds.

In other Schein news, the company has acquired $50 million privately held Provet Holding AG, a Swiss distributor of pharmaceuticals, diagnostic products, and food for pets. Though Provet does not have a catalog, the deal gives Schein another 25 field sales reps and 10 telesales reps within its European animal health unit, which now spans Austria, Germany, Portugal, and Spain.

While at Schein, Mlotek has helped acquire and integrate more than 100 businesses during the last decade. “We’ve been busy,” he muses.

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