By Padmanabhan Ananthan
Feb 18 (Reuters) – Cencora will sell its subsidiary MWI Animal Health to privately held Covetrus in a deal valuing the unit at $3.5 billion, the companies said on Wednesday, as it aims to narrow its focus on drug distribution.
Under the agreement, Cencora will receive $1.25 billion in cash at closing, $800 million of preferred equity and $1.45 billion in common equity in the combined company, while keeping a 34.3% non-controlling stake in the merged business.
Cencora has been sharpening its focus on drug distribution, planning to divest non-core businesses, while doubling down on its core operations to drive long-term performance.
The animal-health sector is dominated by drug makers like Zoetis, Merck Animal Health, Boehringer Ingelheim and Elanco, whose products anchor much of the veterinary market even as clinics contend with uneven swings in pet‑care demand.
Evercore ISI analyst Elizabeth Anderson said the deal may be “modestly dilutive” to neutral at first but should pay off longer term, as it allows Cencora to refocus on stronger core assets, simplify its portfolio and clean up its balance sheet for more durable growth.
The company had previously said the animal unit does not closely align with the company’s long-term strategy, along with legacy U.S. hub services and a pro forma equity investment in Brazil.
Leerink Partners analyst Michael Cherny said MWI’s role as an animal‑health distributor offered limited overlap within a human‑health‑focused business, and that diverting attention toward other growth areas is a prudent move.
The companies said the deal is subject to regulatory approvals and other customary closing conditions.
Cencora reaffirmed its fiscal 2026 outlook, noting that it does not anticipate the deal closing before the end of its financial year in September 2026.
(Reporting by Padmanabhan Ananthan in Bengaluru; Editing by Vijay Kishore)
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