Heska Corporation Acquires Majority Interest in Cuattro Veterinary USA
Published: Feb 25, 2013
LOVELAND, Colo., Feb. 25, 2013 /PRNewswire/ -- Heska Corporation (NASDAQ: HSKA), ("Heska"), a leading provider of veterinary diagnostic and specialty products, announced today the acquisition of 54.6% of Cuattro Veterinary USA, LLC ("Cuattro Vet" or "the Company").
The Company will continue to use the successful Cuattro name, brands, R&D, sales, service and production resources that have made Cuattro Vet the fastest growing, best-in-breed digital radiography, cloud-based PACS, ultrasound and imaging services suite in veterinary medicine. Cuattro Vet products are a new platform and market for Heska, yet the professional sales, marketing, and service organizations of both Cuattro Vet and Heska serve the same high quality veterinary practices throughout the United States. The Company anticipates benefits to expand the sales of each product segment, through increased market presence, bundling programs, cross-promotion and the ability to provide more value propositions to each customer contact.
Cuattro Vet has been operating for approximately two years in the United States, during which time it has built a growing and profitable revenue stream. In connection with the transaction, the sales and marketing team of Cuattro Vet joined forces with Heska, and will continue to be led by Rod Lippincott and Steve Asakowicz, who joined Heska as Executive Vice Presidents, and who will continue to have responsibility for digital imaging opportunities. In addition, Kevin Wilson, a founder of Cuattro Vet, has joined Heska as President and Chief Operating Officer. Dr. Mike McGinley will assume a new role as President, Biologicals and Pharmaceuticals, reporting to Mr. Wilson. Dr. McGinley will continue his many years of direct responsibility of our operations in Des Moines, Iowa and Fribourg, Switzerland and will continue to direct Heska's manufacturing of products for third parties, expansion of global allergy efforts and product development regulatory requirements.
Heska paid approximately $7.65 million in cash and stock for its interest in Cuattro Vet, including slightly more than $4 million in cash. Immediately following and as a result of the transaction, former Cuattro Vet unit holders will own approximately 7.2% of Heska's public common stock. The remaining minority position (45.4%) in Cuattro Vet is subject to purchase by Heska under performance-based puts and calls following calendar year 2015, 2016 and 2017. Should Heska undergo a change in control prior to 2017, Cuattro Vet minority unit holders will be entitled to sell their Cuattro Vet units to Heska at the highest call value they could have otherwise obtained. Heska's position in Cuattro Vet is subject to premium repurchase or discounted sale under calls and puts expiring 18 months following the closing of the transaction.
"We are extremely excited about this great opportunity to grow our business," commented Robert Grieve, Heska's Chairman and CEO. "We consider the products offered by Cuattro Vet to be best in class and we have been seeking truly differentiated products in these areas for some time. Digital imaging and the long-term archival of imaging studies in cloud-based data centers is one of the fastest growing segments in veterinary medicine. These products are also often the most expensive, marquee investments made by veterinarians. A desired brand and unparalleled performance in this space generates not only a halo effect for our other products, it creates entirely new revenue and growth opportunities for Heska that are separate from Heska's diagnostic instruments, allergy, single-use diagnostics and other testing efforts that are relied upon by thousands of veterinarians around the world. In addition to the greater consolidated revenue potential that we seek from this acquisition, we are perhaps as excited to have added an extraordinarily deep team of sales and management talent that has a proven history of creating that special mix of simultaneous profit and brand expansion in the veterinary capital equipment space."
"Heska has built over many years market recognition for its quality and relationships," Kevin Wilson added. "This is well known. What was perhaps less appreciated by us and others prior to our diligence is the sophisticated, highly efficient and scalable operational systems of Heska. These will allow our rapidly expanding imaging and cloud data hosting company to grow even faster, by focusing on its core competency of profitably selling and developing solutions. By adding our team and products to Heska's impressive, nationwide network of inside sales, outside sales and product support specialists, our ability to place Cuattro imaging systems with veterinary customers is greatly enhanced. It seems that nearly every customer who sees a Cuattro product wants one. Because of Heska's reach, so many more customers will now see even more Cuattro products." Mr. Wilson and his family entities will, post-closing, own more than 4% of Heska stock. Mr. Wilson continued, "I also want to express my commitment to Heska - not just in spirit, but in fact. Not only have I accepted the position of President and Chief Operating Officer of the Company, we have now made a significant statement through our ownership of Heska stock. We see this as a very exciting opportunity. Because of our diligence and our recognition of the value of Heska to us, I am encouraged to enhance that value in my role as President and Chief Operating Officer, and also in my role as a very interested investor. We at Cuattro Veterinary USA are excited to benefit from the remarkable reputation of Heska and to write new chapters to its wonderful story."
Management will be available to discuss this transaction in more detail at the Company's upcoming earnings call on Monday, February 25, 2013 at 2:30 p.m. MST (4:30 p.m. EST). To participate, dial (877) 941-8631 (domestic) or (480) 629-9723 (international); the conference call access number is 4603888. The conference call will also be broadcast live over the Internet at http://www.heska.com. To listen, simply log on to the web at this address at least ten minutes prior to the start of the call to register, download and install any necessary audio software. Telephone replays of the conference call will be available for playback on Heska's home page at www.heska.com until March 11, 2013. The telephone replay may be accessed by dialing (800) 406-7325 (domestic) or (303) 590-3030 (international). The replay access number is 4603888.
Heska Corporation (NASDAQ: HSKA) sells advanced veterinary diagnostic and other specialty veterinary products. Heska's state-of-the-art offerings to its customers include diagnostic instruments and supplies as well as single-use, point-of-care tests, pharmaceuticals and vaccines. The Company's core focus is on the canine and feline markets where it strives to provide high value products and unparalleled customer support to veterinarians. For further information on Heska and its products, visit the company's website at www.heska.com.
This announcement contains forward-looking statements regarding Heska's future financial and operating results, including those of Cuattro Veterinary USA, LLC, which was recently renamed Heska Imaging US, LLC ("Cuattro Vet"). These statements are based on current expectations and are subject to a number of risks and uncertainties. There is no assurance that the anticipated benefits of the transaction described above will be realized. Additional factors that could affect the business and financial results of Heska generally include the following: uncertainties related to any individuals or organization's ability to project its future commercial success or the commercial success of a third party; uncertainties related to the productivity of Heska's and CuattroVet's sales personnel, including the ability to increase or maintain such productivity; uncertainties related to Heska's ability to profit from instruments placed with customers, which may not be used as anticipated or at all by such customers; uncertainties related to relying on any entity's brand or reputation for future success; uncertainties related to Heska's ability to increase or maintain its revenue, and gross margin, in future periods; uncertainties related to third-party product development efforts, which Heska is significantly reliant upon; uncertainties related to the commercialization of new products, such as market acceptance; uncertainties related to Heska's ability to maintain a given level of profitability, or profitability at all; competition; risks related to Heska's reliance on third-party suppliers, which is substantial; uncertainties related to Heska's ability to successfully market and sell its products in an economically sustainable manner; uncertainties related to any organization's ability to perform as expected; uncertainties regarding Heska's reliance on third parties to whom Heska has granted substantial marketing rights to certain of Heska's existing products, such as a unit of Merck & Co. Inc., which has exclusive rights to Heska's heartworm preventive in the United States; and the risks set forth in Heska's filings and future filings with the Securities and Exchange Commission, including those set forth in Heska's quarterly and annual reports.
SOURCE Heska Corporation