Veterinary services firm CVS Group (LON:CVSG) announced it would buy back £50 million of its shares alongside its latest refinancing. The move comes after sustained pressure from Canadian actvisit Converium Capital, which owns a small stake in the group.
In the clear
CVS announced the buyback together with a refinancing of the group’s £350 million bank debt on improved terms. As part of the deal, leverage is capped at two times net debt to EBITDA except in the event of acquisitions ‘which provide a clear runway’ to return to under two times leverage.
On the subject of acquisitions, CVS revealed it had acquired an Australian practice for an initial outlay of AU$8.2 million (£4 million). Contracts have also been signed for a further acquisition worth AU$ 3.2 million (£1.7 million).
The firm has ‘an attractive pipeline of acrretive bolt-on acquisition opportunities’ in Australia, and could spend £50 million/year. It is also looking at UK acquisitions after the CMA concluded its investigation into the veterinary market.
CVS says the decision to buy back shares was based on their attractive valuation due to global uncertainty. Most investors will chalk this up as a win for Converium though, given its campaign for the board to address the poor share price performance.
Where CVS has been smart is in presenting the buyback as part of a larger capital allocation programme. It has pitched itself as primed for growth, and even suggested it could spend £50 million a year on deals just in Australia.
In that context, a £50 million share buyback looks reasonable, and isn’t likely to raise the hackles of regulators. Nor will it upset pet owners, unless they see their bills go up for the benefit of shareholders.
Read the press release here:
https://www.cvsukltd.co.uk/investor-centre
