- Raymond James downgraded the rating on Covetrus Inc CVET from Outperform to Market Perform and removed the prior $22 price target after the company received a buyout at $21 per share.
- Though $21 may not ultimately prove to be the final resting place in terms of the offer price.
- Raymond James believes the proposed purchase price captures the most fundamentally driven value-creation scenarios over the next 12-18 months without a competing financial sponsor offer or strategic bid.
- News broke of an offer for the remaining unowned shares of Covetrus from Clayton, Dubilier & Rice (CDR), its current largest shareholder, and P/E powerhouse TPG.
- CDR currently owns 33.67M shares, or 24.15% of the total outstanding.
- There are opportunities for bolt-on acquisitions to the CVET platform, given its importance to general vet practices.
- However, with the company’s debt load (3.75x EBITDA) and relatively light free cash flow generation, CVET’s ability to take advantage of its positioning within vet practices to add ancillary growth vehicles is limited when valuations have contracted substantially.
- Price Action: CVET shares are down 1.01% at $19.51 during the market session on the last check Monday.
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