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Bendigo-based vet services business Apiam Animal Health (ASX: AHX) has been flagged as a potential takeover target in a sector that has rarely been out of the spotlight over the past five years following a series of big-ticket buyouts.
Apiam today confirmed that it has received a non-binding indicative offer (NBIO) from an undisclosed party, but the company, which currently has a market capitalisation of $89 million, has firmly rejected the offer on the grounds that it undervalues the business.
Today’s announcement by Apiam was triggered by a report in the Australian Financial Review that Apiam’s chairman Andrew Vizard this year received several non-binding offers that the company declined to progress. Among the parties named were Swedish private equity group EQT, Quadrant Private Equity and “a trade player out of Canada”.
Without naming any party, Apiam today disclosed that it has “advised the prospective bidder that it does not intend to engage further with the prospective bidder on the basis of the NBIO received”.
Apiam Animal Health is a specialist operator in the field of veterinary care, growing over the past nine years to become the country’s largest rural and regional veterinary group by providing services to the companion animal and livestock industries.
The company has scaled through acquisitions, the last of which was early last year, and in FY24 it posted a 117 per cent increase in net profit to $4.9 million following a 7 per cent increase in group revenue to $204.8 million.
Underlying profit rose 23 per cent to $15.8 million, led by lower overheads and its Intensive Animal Vet Services subsidiary’s focus on “high value, technology-driven veterinary and production consultancy services”.
The takeover interest in the company comes on the heels of major transactions in the sector in recent years, including EQT’s $1.4 billion acquisition of VetPartners in 2023 and Pemba’s 2021 investment in Vets Central which has helped the company become the third-largest veterinary practice operator in Australia.
Prior to that, the formerly listed veterinary clinic operator Greencross, which was founded by entrepreneur Dr Glen Richards, was bought by US private equity group TPG for $675 million in 2019.
News of a potential offer to acquire 100 per cent of Apiam’s shares follow a strong run for the company’s share price this year, with the stock up more than 40 per cent in calendar 2024.
The shares were trading 3c higher at 49c at 3pm (AEDT), valuing the company at $89 million. However, the price of shares is still well below their $1 issue price in 2015 which valued the company at $98.5 million prior to listing.
A brief spike in the share price to a 56c close in September last year sparked an ASX price query, but without any apparent reason for the increase the stock retreated to a low of 23.5c towards the end of the year.
Apiam Animal Health currently operates 80 clinics in five states, supporting 330 veterinarians. The company has expanded its national footprint in recent years through acquisitions, most recently adding five new clinics in high-growth regional areas of NSW through two separate acquisitions worth $11.2 million in January last year.
Apiam operates two divisions – Clinical Vet Services, a business-to-consumer model that makes up about 78 per cent of its business, and Intensive Animal Vet Services, a high value business-to-business division that services commercial feedlot and piggery operators.
CEO Dr Chris Richards forecast continued growth for the business in the current year, supported by “resilient” demand for veterinary services in regional and rural locations.
“We have a business model diversified across various industry sectors, servicing companion animal pet and livestock owners all the way through to large commercial pig and beef feedlot operators,” Richards said in the company’s annual report.
While the company has implemented initiatives to improve its performance, Richards has not ruled out further acquisitions for Apiam should the opportunities arise.
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