Private Equity Firm Buys Patterson Companies Medical Business

Patterson Companies Inc. is selling its medical business (Patterson Medical) to private equity firm Madison Dearborn Partners (MDP) for $715 million in cash. The company has been looking to sell this unit, which is focused on physical rehabilitation products, in order to focus more closely on its higher growth businesses in dental and animal health. It recently bolstered the latter by closing a veterinary-focused acquisition.

“Patterson’s strategy for growth is to focus our resources and investments on building our dental and animal health businesses. We believe that the medical business will thrive under the new ownership that is dedicated to driving growth in the rehabilitation market. We received a strong offer from MDP. We are also enthusiastic about MDP’s commitment to support Patterson Medical’s customers and employees going forward,” said Scott P. Anderson, chairman and CEO of Patterson Companies. “We believe that the medical business is solid, with a strong product portfolio and is well-positioned for future success.”

The company retained BofA Merrill Lynch earlier this year to find a buyer for its medical business. In fiscal 2015, the medical segment had $464.2 million in sales — putting the deal price at less than one-and-a-half times its sales.

“The acquisition of Animal Health International and divestiture of Patterson Medical are transformational moves for Patterson Companies and a key component of our strategic intent to take a broadened view of our markets,” noted Anderson. “We believe that we can accelerate returns on invested capital and increase shareholder value by focusing on our closely aligned dental and animal health units. By concentrating our efforts, we believe we have created the size and scale necessary to build on our success in our chosen markets.”

MDP also recently led a group of investors making the $2.3 billion sale of nitric oxide drug/device player Ikaria Inc. to Mallinckrodt Pharmacueticals.

Patterson Medical primarily offers products for occupational and physical therapists, but it also has a sports medicine unit specifically aimed at helping athletes recover well.

For its part, Patterson will use the proceeds from the sale to pay down the debt associated with its $1.1 billion acquisition of Animal Health International that closed in mid-June.

“We are pleased to partner with the management team at Patterson Medical,” said Tim Sullivan, a managing director at MDP. “MDP has extensive experience investing in healthcare distribution companies and corporate carve-outs, and we plan to utilize our resources and expertise to support Patterson Medical’s U.S. and international growth. Patterson Medical has strong competitive advantages and we look forward to supporting the team as they execute the next stage of the company’s growth.”

Upon completion of the sale to MDP, the business will continue to operate as Patterson Medical for a transition period before rebranding as part of its independence from Patterson Companies.

Madison Dearborn Partners, based in Chicago, Ill., is a private equity investment firm. Since its 1992 birth, the firm has raised six funds with aggregate capital of more than $18 billion and has completed approximately 130 investments. MDP invests in businesses in various industries, including healthcare; basic industries; business and government services; consumer; financial and transaction services; and telecom, media and technology services. Notable healthcare investments include Option Care, Sage Products, Kaufman Hall, Sirona Dental, Team Health, and VWR International. 

Patterson Companies is a value-added distributor serving the dental, animal health and rehabilitation supply markets.