Benjamin Shaw rings the opening bell of the Nasdaq stock exchange in February 2019 as shares of animal health products company Covetrus go public. The company may soon be taken private in a $4 billion deal pending stockholder approval. Libby Greene photo

Maine is home to 10 publicly traded companies, but the newest – and the largest, by revenue – is poised to leave those ranks.

In barely two weeks, stockholders of Covetrus Inc., a Portland-based animal health products and technology company, may approve the company’s sale to a pair of private equity firms from out of state.

Plans to sell the company were announced in May but require approval at an Oct. 11 stockholders’ meeting to move forward. Clayton, Dubilier & Rice, based in New York City, and TPG Capital of Fort Worth, Texas, would own Covetrus after paying stockholders $21 a share, putting the value of the deal at about $4 billion.

Buying a company and taking it private is a little unusual – it’s far more common for a privately formed business to decide to sell stock to the public.

An initial public offering can give a business a way to raise money for growth and allows the business founders to cash in on their first few years of operation. In contrast, going private gives the leaders and new owners of a public company more flexibility, freeing them from some regulatory requirements and shielding executives from the pressure of outside investors.

In a May filing with the Securities and Exchange Commission, Covetrus and the two private equity firms indicated they plan to keep the company’s headquarters in Portland, but did not say how the sale might affect employees. Covetrus has about 5,500 workers around the world, including 1,600 in North America and about 300 in Maine.

Covetrus, currently traded on Nasdaq under the symbol CVET, reported revenue of $4.58 billion last year while posting a net loss of $54 million.

The two private equity firms already own about a quarter of the company’s stock and the price of $21 per share represented a 39 percent premium on the share price before the purchase was announced this spring. Seven years ago, CD&R invested roughly $55 million in a Covetrus predecessor company, Vets First Choice, and that investment was transferred to Covetrus when it was formed.

YOUNG COMPANY, DEEP ROOTS

Covetrus launched in February 2019 through a merger of Portland-based Vets First Choice and the former animal health division of Henry Schein Inc. (Nasdaq: HSIC), of Melville, New York, a medical and dental products supplier.

Vets First Choice, which provided technology and services for veterinarians, was started in 2010 by David Shaw and his son, Benjamin Shaw. David Shaw founded Westbrook-based Idexx Laboratories Inc., which focuses primarily on animal-health diagnostic tests, in 1983.

Today, Idexx (Nasdaq: IDXX) is Maine’s second-largest public company and competes with Covetrus in some areas of business. While the younger company’s revenue surpassed the $3.2 billion Idexx brought in last year, Idexx turned a $932 million profit in 2021. Idexx also has a far larger market capitalization, or value of outstanding shares – $31 billion, compared to $3 billion for Covetrus.

Covetrus had a rocky start. Initial earnings disappointed many investors and the company took a nearly $1 billion hit on “goodwill,” an intangible asset, in the first year. A group of shareholders also sued the new company, saying they were misled about its pre-IPO finances by top executives.

CEO Benjamin Shaw resigned from Covetrus, and other senior executives, including the chief financial officer, also left. David Shaw stepped back to a less active role on the company’s board. Eventually an outsider, New York health technology entrepreneur Benjamin Wolin, became CEO, and he holds that post today.

The company’s financial performance has generally improved and the stock price increased under Wolin, who has said the sale of Covetrus is “an important milestone for our company, shareholders, employees, customers and partners.”

He said the sale would allow the company to continue to help veterinarians around the world and that the new owners share that commitment to promoting animal health.

Wolin, however, could soon be out of a job, although the new owners have indicated they plan to keep the management team in place, at least initially.

It’s not yet clear who might ultimately lead Covetrus if it’s successfully purchased by the private equity firms. The deal would give Wolin a “golden parachute” upon termination worth $17.8 million in pay, stock and benefits. Other top executives would have severance packages ranging from $3.2 million to $6.6 million.