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April 2, 2020

Covetrus closes on subsidiary sale, under post-outbreak terms

File Photo Covetrus, the global animal-health company whose Portland headquarters are shown here, completed the sale of a German subsidiary under modified terms.

Covetrus Inc. (Nasdaq: CVET), the global provider of animal-health technology and services based in Portland, has completed the sale of a German subsidiary — after terms of the deal changed.

Covetrus said in January it would sell scil animal care co. to Colorado-based Heska Corp. (Nasdaq: HSKA), a manufacturer of veterinary specialty products, for $125 million in cash. The sale was intended to help Covetrus pay down debt of over $1 billion.

But the sale closed with Heska paying $110 million, according to a news release Wednesday. The final terms also eliminated a $10 million escrow fund that was to cover the cost of “any potential claims tied to the transaction” for 18 months, Covetrus said in the release.

In addition, the new sale agreement hiked the threshold of claims required before Heska can seek indemnification against Covetrus, from a total of roughly $545,000 to $10.9 million.

What prompted the change was not immediately clear.

Jon Aagaard, a spokesman for Heska, told Mainebiz "the change was primarily related to COVID-19 uncertainty" and was designed to support the "safe and healthy operating [of scil] for employees for the long-term during a time of concern for them and their families."

A Covetrus spokeswoman declined to comment on the reason for the change.

The companies didn’t appear to quite agree on how the escrow was to be funded. While Covetrus said in its release that the fund was to be paid by Heska, Heska said in its own news release that the money was to have come from Covetrus.

Aagaard explained that the original terms called for the escrow to be held from the sale proceeds upon closing, with any balance of the escrow being released to Covetrus after 18 months. Heska “interpreted this as Covetrus funding," he said.

The Covetrus spokeswoman said the Maine company’s news release was correct.

Covetrus has a market capitalization of over $800 million and employs about 5,500 people worldwide.

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