On 13 February 2018, Dechra acquired AST Farma B.V and Le Vet Beheer B.V. for a total consideration of €340.0 million on a debt-free and cash-free basis. The total consideration was satisfied as to approximately 75% in cash and 25% in new Dechra shares, which are subject to a two year lock-in.
AST Farma was established in 1999 by Sebastiaan Tesink, and had grown to become one of the leading companion animal pharmaceutical companies in the Netherlands, focused on generic plus products. The business was started with a basic range of companion animal registrations acquired from Fort Dodge (now Zoetis), and grew its reputation by launching niche products, including ranges for minor species, and by offering added value services to veterinarians. In an independent Dutch market research conducted by Vet 150, assessing customers' opinions of suppliers, AST Farma has consistently scored in the top two companies among companion animal veterinarians for the past ten years.
Dechra considered AST Farma to be innovative and a very customer oriented company. Part of its success had been driven by their direct-to-vet delivery model, with over 80% of sales going direct instead of through the wholesalers. In the past 15 years they have been very focused on developing quality generic plus products. Additionally, they have taken molecules from human medicine and developed the first veterinary licensed equivalent products. A prime example of this is the European registrations of Metrobactin® and Tralieve®.
Le Vet B.V., a subsidiary of Le Vet Beheer B.V., was established in 2002 by Alexander Tesink. Le Vet had focused on the European markets outside of the Netherlands, registering 60 of the AST Farma products in EU member states which were sold through a network of marketing partners including Dechra.
Reasons for the Acquisition and Progress To Date
- Strengthening the Group's Position in the Netherlands
The combination of Dechra and AST Farma in the Netherlands has moved Dechra to number four in the rankings of animal health companies in that market. In April 2018, we integrated the two sales organisations in the Netherlands into the AST Farma premises in Oudewater. The changes in roles and responsibilities have been communicated to our customers and the team was quickly working cohesively. Combining the strengths of both companies and ensuring that we continue to maintain the good reputation and image of AST Farma among Dutch veterinarians, will enable us to create the strongest partner for companion animal veterinarians in the Netherlands.
- New Opportunities with AST Farma Direct to Vet Model
In the Dutch market the direct-to-vet distribution model will offer new opportunities for Dechra. We intend to increase market penetration and improve margins by making Dechra's products available directly to veterinarians through AST Farma logistics and by promotion through the combined enlarged sales team. We will start supplying the Specific nutrition range through this model from 1 September 2018 and the complete Dechra range in January 2019.
- Increasing our Broad Portfolio of Products in the EU
In the rest of Europe, gaining access to the 60 Le Vet products will significantly strengthen our range. We already market a number of products, 15 of the 60 products, in the majority of EU territories; however in some countries, notably Germany and Belgium, we had no access to the Le Vet product range.
Since completion we have already terminated 20 agreements with Le Vet marketing partners across Europe. We will start to relaunch Le Vet products in Dechra livery, starting in Germany and France in early September 2018, with a flow of products continuing through to the end of 2019. By this time we will be marketing the vast majority of Le Vet products through our own sales organisations. Bringing sales that were made through third party marketing partners in-house allows us retain the distribution margin.
- Access to a Robust Pipeline
In addition to the existing portfolio, AST Farma and Le Vet were developing a robust new product pipeline of over 30 products, a number of which have already been approved since the acquisition completed. This pipeline will further strengthen Dechra's portfolio to its customers across Europe and we will also look to register a number of the products in our international markets. We are now preparing to launch the first new product, Tralieve (a pain relief tablet), in Germany, the UK and France. This first veterinary license for the use of tramadol in dogs fits perfectly into our fast growing anaesthesia and analgesia focus therapeutic range.