Health-care products distributor Henry Schein is spinning off its animal health business and merging it with Vets First Choice to form a new company called Vets First Corp.
The deal, announced Monday, will combine Henry Schein's veterinary supplies, software for practices and distribution network with Vets First Choice's prescription management platform.
Henry Schein anticipates receiving from the transaction about $1 billion to $1.25 billion in cash on a tax-free basis. Its shareholders will own about 63 percent of the new company, and Vets First Choice shareholders will own about 37 percent of it.
Americans are investing more in their pets, spurring interest from companies searching for growth. In February, General Mills said it would buy pet food maker Blue Buffalo for $8 billion. M&M-owner Mars has bulked up its pet business, which includes Iams, Pedigree and Whiskas brands. Last year, it acquired animal hospital company VCA for $9.1 billion.
Meanwhile, the threat of Amazon's entry into health care looms. The company already sells some supplies to doctors and dentists through its Amazon Business division. Henry Schein says spinning off and merging the animal health business will allow it to focus more on the dental and medical supply businesses.
"Some people felt this (deal) is perhaps to fend off online retailers, but it has absolutely nothing to do with that. This is about bringing two great companies together where (veterinary) practitioners will be more successful," Henry Schein CEO Stanley Bergman said in an interview with CNBC.