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Henry Schein makes two acquisitions

Henry Schein Inc., of Melville, plans to acquire

Henry Schein Inc., of Melville, plans to acquire a majority stake in a provider of marketing and software services to veterinarians and a portion of an Italian dental distributor. Credit: Ed Betz

Henry Schein Inc. plans to acquire majority stakes in a U.S. provider of marketing and software services to veterinarians, and in an Italian distributor of dental equipment.

The Melville-based company announced Monday that it plans to buy 80.1 percent of Vetstreet Inc., which is headquartered in Yardley, Pennsylvania, and had sales of about $43 million last year. The deal is expected to close in early 2016.

The remaining stake in Vetstreet will continue to be held by VCA Inc., whose Nasdaq symbol is WOOF. VCA owns, operates and manages a large network of veterinary hospitals and veterinary clinical laboratories, according to the company.

Vetstreet, founded in 2008, "offers veterinary practices a fully integrated suite of online and offline products and services that improve veterinary practices' ability to communicate with pet owners for all of their pet needs and address the lack of compliance with wellness visits," Henry Schein Inc. said in a news release.

Vetstreet's services "create a continuity of communication with pet owners that builds customer loyalty, improves care through better compliance and improves the health of veterinary practices," Stanley M. Bergman, chairman and chief executive of Henry Schein, said in a statement. Henry Schein is Long Island's largest public company, with revenues of more than $10 billion.

Henry Schein and VCA didn't disclose the price of the acquisition. VCA said it expected to record a gain of $30 million to $35 million on the deal. In layman's terms, the gain is calculated as the difference between the cost of starting the business and the sale price, said Steven Greenberg, a Melville-based accountant and a past chairman of the national tax committee of the National Conference of CPA Practitioners.

Henry Schein is also acquiring Dental Trey, an Italian dental distributor with annual revenue of $49 million, for an undisclosed price.

Henry Schein has been steadily making acquisitions -- especially in the veterinary and dental industries -- although the size of the deals has grown smaller in recent years as the industries consolidate and there are fewer large companies to buy, said Brandon Couillard, an analyst with Jefferies LLC.

The Melville company generates about $600 million in free cash flow annually, and it has historically said it uses about half that amount -- $200 million to $300 million -- to fund mergers and acquisitions, Couillard said.

The ability to offer Vetstreet's software services makes it more likely that customers will also use Henry Schein as a distributor, Couillard said: "It's something else they can bundle to help veterinary practices operate more efficiently."

In the past, when Henry Schein has bought software companies, it has paid about two to three times the companies' annual revenues, Couillard said. In 2011, it paid about $45 million to buy two veterinary software companies, McAllister Software Systems Inc. and ImproMed Inc., that had annual sales of $25 million, Couillard said.

In addition to its website, Vetstreet also offers marketing and data analytics services as well as HealthyPet Magazine. Its founder and chief executive, Derrick Kraemer, and his management team will continue to lead its workforce of about 100 people, according to Henry Schein.

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