VCA Antech, Inc.
VCA Antech, Inc.
Incorporated: 1986 as Veterinary Centers of America, Inc.
Sales: $443.54 million (2002)
Stock Exchanges: NASDAQ
Ticker Symbol: WOOF
NAIC: 541940 Veterinary Services
VCA Antech, Inc. operates the largest network of veterinary hospitals and clinical laboratories in the United States, controlling nearly 250 hospitals and a network of diagnostic laboratories that serve approximately 13,000 animal hospitals and veterinarians in all 50 states. VCA’s animal hospitals offer a complete range of surgical and general medical services, pharmaceutical products, and pet wellness programs. The company’s clinical laboratories, capable of performing more than 20 million tests annually, provide sophisticated testing and consulting services used in the detection, diagnosis, treatment, and prevention of diseases affecting animals. A typical VCA hospital measures between 4,000 square feet and 6,000 square feet, generates between $1 million and $2 million in annual revenues, and is supported by three to five veterinarians.
VCA began with an ambitious plan. The company was founded with the intention of becoming the biggest in its industry. Any stature less than market dominance would not suffice. The company’s strategic objective was to consolidate the highly fragmented U.S. veterinary care industry, an industry populated by 50,000 veterinarians who primarily were either entrepreneurs or working in the country’s 16,000 independent clinics. VCA aimed to acquire these small clinics and operate them under its corporate umbrella, seeking to cobble a nationwide network of veterinary hospitals whose financial, managerial, and administrative needs were governed by a single entity operating under a single brand. Before VCA was founded, no company had attempted to consolidate the multi-billion-dollar veterinary care industry, leaving the market open to an enterprise armed with capital and managerial expertise to reap the vast financial rewards. “There was not anybody really competing for these businesses,” an analyst with a New York-based securities brokerage firm remembered in a May 22, 1995, interview with the Los Angeles Business Journal. The pioneers, in this respect, were the three founders of VCA, who hatched their bold plan while working for AlternaCare, a publicly held company that owned, operated, and developed freestanding outpatient surgical centers in the human healthcare sector. The AlternaCare-bred founders—Robert Antin, Arthur Antin, and Neil Tauber—set out in 1986 to grab hold of the healthcare industry for companion animals.
For a company endeavoring to vault itself towards national prominence, VCA’s assault on the veterinary care market was predicated on the experience and reputation of its founders. Robert Antin headed VCA’s triumvirate, serving as the company’s chief executive officer and president from its inception. Antin co-founded AlternaCare, presiding as the healthcare company’s chief executive officer and president. Recipient of an MBA with a certification in hospital and health administration from Cornell University, Antin served as an officer of American Medical International, Inc. before co-founding AlternaCare, helping to orchestrate the development of the company’s chain of human healthcare centers. At VCA, Antin was joined by his brother, Arthur Antin, who assumed the titles of chief operating officer, senior vice-president, and secretary of the fledgling veterinary care consolidator. Arthur Antin, a recipient of an M.A. in community health from New York University and an attendant of post-graduate programs at Columbia University, served as AlternaCare’s director of marketing and investor relations. His contribution to AlternaCare’s growth involved spearheading the company’s development and execution of marketing strategies that engendered its chain of outpatient surgical centers. Neil Tauber, VCA’s senior vice-president of development at the company’s 1986 inception, served as AlternaCare’s director of corporate development, applying his talents to the acquisition of new businesses. Recipient of an MBA from Wagner College, Tauber worked for MDM Services before joining AlternaCare, taking responsibility for the company’s operation and development of a chain of retail dental centers.
Presumably, it was Tauber’s talent that launched VCA’s preconceived acquisition campaign. The company, intent on sweeping across the country with acquisitive zeal, began its bid toward greatness with the 1987 purchase of the veterinary practice belonging to Richard Gebhart and Pat Sevedge, located in Los Angeles. The acquisition became VCA West Los Angeles, the company’s flagship unit whose purchase promised a slew of acquisitions to follow. Aside from the not-to-be-forgotten need for capital, the success of the company’s acquisition campaign depended on the ability of its executives to convince independent veterinarians and clinics to sell their businesses to VGA. Once the company acquired a hospital, which typically lacked a management structure—“There’s one boss and everybody else reports to that boss,” Robert Antin explained in a May 22, 1995, interview with the Los Angeles Business Journal —the VCA team applied its touch to the new property. An organizational structure was put into place, filled with administrative staff and medical directors, giving the company the conduits through which it applied its business methods as directed by executives at the company’s main offices in Santa Monica, California.
The expansive acquisition spree expected to follow the establishment of the flagship hospital was slow to materialize. Restricted in its acquisitive activities by a lack of capital, the company had increased its size to only six hospitals by 1989—hardly the pace of expansion anticipated by a company bent on sweeping across the nation. Annual sales amounted to $10 million, a fraction of the total generated a decade later. During the first half of the 1990s, Antin and his co-founders made two significant moves to bolster VCA’s revenues, giving the company the financial means to drive its national expansion.
1991 IPO Fuels Expansion
As the 1990s began, Antin and his team took the logical step of converting to public ownership. After filing with the Securities and Exchange Commission for an initial public offering (IPO) of two million shares in mid-1991, the company completed its IPO in October 1991, raising $14.4 million, from which it netted approximately $12 million. With the proceeds, the company was able to expand more aggressively than it had during the late 1980s, growing into a chain of more than two dozen hospitals by the end of 1993. By this point, the company was generating more than $25 million in annual revenue, a total collected from the company’s veterinary centers and from one other important source: clinical laboratory services. As VCA built its network of animal hospitals, it also built a network of veterinary diagnostic laboratories to serve the nation’s veterinarians. The clinical laboratory services arm of VCA developed into Antech Diagnostics, which, operating alongside the VCA Animal Hospital network, gave the company a singular presence in the veterinary care industry. Through Antech Diagnostics, the company provided consulting services used by veterinarians in the detection, diagnosis, evaluation, monitoring, treatment, and prevention of diseases and other conditions affecting animals.
The 1991 IPO represented one important step toward gaining the ability to expand more aggressively. The second positive move in this direction occurred in January 1994, when VCA formed a partnership with Pittsburgh-based conglomerate H.J. Heinz Co. Through the joint venture with Heinz, VCA added a third source of revenue, formulating a line of pet food that Heinz manufactured. As part of the deal, Heinz also took a 10 percent interest in VGA, becoming the company’s primary source of capital. By mid-1994, when the company claimed to be the largest veterinary care chain in the country, there were 28 VCA hospitals in operation and promise of a fourth revenue stream. The company signed a letter of intent to acquire the only pet insurance company in the country.
With the prestige and the deep financial pockets of Heinz supporting its efforts, VCA began to expand more aggressively. Revenues soared by 67 percent in 1994, reaching $42.3 million. By 1995, there were 37 hospitals in operation, with plans to acquire ten more veterinary centers during the year. The company also owned and operated five veterinary laboratories.
Aggressive Growth in the Late 1990s
During the second half of the 1990s, VCA solidified its position as the largest operator of animal hospitals and diagnostic laboratories in the United States. The company recorded prolific physical growth, exerting its influence as the only large consolidator of animal hospitals in the country. VCA’s stock value soared during the first years of the late 1990s, eclipsing $30 per share as the strategy devised a decade earlier fully manifested itself. During the ten-year span, VCA’s role as the most aggressive national consolidator was played in a fecund business environment. Between the company’s IPO and 1996, the annual growth rate in the animal healthcare sector nearly reached 10 percent. During the late 1990s, the annual rate of growth in the industry reached 10.6 percent, occurring just as VCA hit its expansionist stride. By the end of the 1990s, the comparison between VCA’s stature mid-way through the decade and its stature at the end of the decade revealed the extent of the growth. The 37-hospital company developed into a chain of more than 200 veterinary centers, its annual revenues leaping from less than $50 million to the $320.5 million collected in 1999. VCA had arrived, holding sway over the market it had captured.
The core philosophy of VCA Antech is simple, but convincing. You love y our pet. As a caring pet owner you only want the best for your pet. Unfortunately pets can’t talk and even the most caring pet owners may not know everything it takes to keep their pets in optimum health, so that they can lead a long, happy, and healthy life. At VCA Antech, we can provide you with the knowledge it takes to make sure your pets feel their best.
VGA entered the 21st century as the dominant company of its kind. In September 2000, it ended nine years of trading as a public concern when Leonard Green & Partners, a merchant banking firm, led VCA through a $530 million recapitalization buyout. As part of the buyout, VCA signed a ten-year management services agreement with Leonard Green. VCA received a $155 million infusion of capital, giving it added fuel for its growth. In exchange, VCA agreed to pay Leonard Green $2.5 million a year for providing investment banking, financial planning, and transaction-related financial services.
The buyout led by Leonard Green swelled VCA’s coffers much earlier than anticipated. The merchant banking firm typically waited three to five years after a company was taken private before returning it to public ownership, but there were favorable market conditions that convinced Leonard Green to speed up the process. “If you look at the number of households with animals, and with multiple animals,” an industry analyst remarked in an August 19,2001, interview with the Los Angeles Times, “that bodes well for the pet supply industry and I’m assuming that would bode well for the veterinary industry as well.” In August 2001, less than a year after being taken private, VCA filed with the Securities and Exchange Commission to return to the public equity markets. The company hoped to raise up to $240 million in the offering.
At the time of the offering, VCA was coming off of recording $354.6 million in sales for 2000, more than 30 times the total generated a decade earlier. Roughly two-thirds of the company’s sales volume was derived from its chain of hospitals, which included 211 units scattered throughout 33 states. The remaining one-third of its sales came from the company’s 15 automated labs that served approximately 15,000 animal hospitals and veterinarians in all 50 states.
Looking ahead, VCA figured to shore up its already stalwart market position in the veterinary care industry. Further expansion promised to increase the company’s share of the vast animal health care market, which in 2002 represented more than $18 billion worth of business. As the company pressed forward, access to capital and the ability to efficiently manage its growth represented two of the most important issues affecting its future success.
West Los Angeles Veterinary Medical Group, Inc.; VCA Clinical Veterinary Labs, Inc.; Lakewood Animal Hospital, Inc.; Robertson Animal Hospital, Inc.; Northern Animal Hospital Inc.; VCA of San Jose, Inc.; VCA Real Property Acquisition Corporation; VCA of Colorado—Anderson, Inc.; Anderson Animal Hospital, Inc.; VCA of Teresita, Inc.
Pet’s Choice, Inc; Banfield, Inc.
- Veterinary Centers of America is founded by three former AlternaCare executives.
- The company acquires its first veterinary hospital.
- The company completes it initial public offering of stock.
- A partnership with H.J. Heinz Co. is formed.
- Leonard Green & Partners completes a buyout of VCA Antech, returning the company to private ownership.
- VCA Antech begins trading as a publicly-owned company.
Cole, Benjamin Mark, “Aggressive Acquisition Strategies Falling from Favor,” Los Angeles Business Journal, November 13, 2000, p. 38.
——, “Vet Firm Wants to Turn Shares into Pet Stock,” Los Angeles Business Journal, June 3, 1991, p. 29.
Musero, Frank, “Planning Dog and Pony Show,” IPO Reporter, August 20, 2001.
Robinson-Jacobs, Karen, “Veterinary Centers to Go Public,” Los Angeles Times, August 10, 2001, p. C1.
Trief, Jaymes, “Four Small L.A. Companies Positioned for Stardom,” Los Angeles Business Journal, June 27, 1994, p. S2.
“Veterinary Cntrs. Of Amer.,” CDA-Investnet Insiders’ Chronicle, May 27, 1996, p. 16.
—Jeffrey L. Covell