Medical and dental giant Henry Schein just got a little bigger. On June 21 the $4.6 billion merchant said it would acquire three divisions of Jericho, NY-based rival Darby Group Cos. 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 dental distributor Darby Dental Laboratory Supply–had 2005 sales of approximately $219 million.
The deal also includes about 100 sales personnel. But according to Susan Vasallo, spokesperson for Melville, NY-based Henry Schein, the acquisition does not include Darby’s direct marketing businesses: veterinary supplier Butler Animal Health and orthodontics supply business OIS.
“The acquisition of these three businesses is an excellent match with Henry Schein’s U.S. operations and affords deeper penetration in our dental and medical divisions,” Henry Schein chairman/CEO Stanley Bergman said in a statement. But 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 the market as much as it is to get new customers,” says Harry Chevan, managing director of New York-based investment bank Gruppo, Levey & Co., who adds, “The purchase price seems to be in the realm of valuation of what the market is paying for medical distributors.”
The past few years have not been kind to Darby. Sales at the privately held company are believed to have tumbled, and many of its key field salespeople have left for rivals such as Henry Schein and St. Paul, MN-based Patterson Dental.
As for the acquired businesses, 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.
Henry Schein expects the transaction to close in the third quarter. The acquisition is expected to be “slightly accretive” to its earnings per share.