Mars to buy pet healthcare provider VCA for $7.7 billion

(Reuters) – Mars Inc is buying pet hospital operator VCA Inc WOOF.O for $7.7 billion in a deal that will tighten the Whiskas and Pedigree pet food maker’s grip on the pet care market.

The deal will help privately held Mars, better known for candies such as MM’s and Snickers, add about 800 pet hospitals to its network of more than 900 clinics, which includes the 61-year-old Banfield pet hospital chain.

The combination of Mars Petcare and VCA will dominate the veterinary care industry in the United States, grabbing an even bigger share of the nearly $4 billion global pet care market.

McLean, Virginia-based Mars is already the biggest pet food company in the world – it held a quarter of the global pet food market as of 2015 – followed by Nestle SA NESN.S, the maker of the Purina cat and dog food brand.

Mars has been diversifying its business as calorie-conscious consumers increasingly shun chocolates and candies, a trend that has weighed on the $183 billion global confectionery market.

Rival Hershey Co HSY.N is also expanding beyond chocolates – it bought Krave, a beef jerky maker, in 2015, while Mondelez International Inc MDLZ.O recently introduced Good Thins, its first snack brand in more than a decade.

Mars said it would offer $93 per share, a premium of 31.4 percent to VCA’s Friday closing price. Including debt, the deal is valued at $9.1 billion.

VCA’s shares were up 28.3 percent at $90.78 in early trading on Monday. The company, founded in 1986, had annual sales of $2.13 billion in 2015.

Mars, which also owns the BluePearl chain of emergency and specialty veterinary care clinics, had annual pet food sales of $17.80 billion in 2015, according to Euromonitor data.

Morgan Stanley Co. LLC and BDT Co were Mars’ financial advisers, while Skadden, Arps, Slate, Meagher Flom provided legal advice.

Barclays was VCA’s financial adviser and Akin Gump Strauss Hauer Feld LLP and Potter Anderson Corroon LLP were legal advisers.

(Reporting by Sruthi Ramakrishnan in Bengaluru; Editing by Saumyadeb Chakrabarty)