Grey Wolf Animal Health Announces Acquisition of Compounding Pharmacy of Manitoba

Grey Wolf Animal Health Corp., a Canadian diversified health company, has announced that it has completed the acquisition of 6303021 Manitoba Ltd., The Compounding Pharmacy of Manitoba (CPM) for total consideration of $22.5 million, including associated real estate, pursuant to a Share Purchase Agreement dated December 2, 2024.

CPM operates a state-of-the-art facility located in Oakbank, Manitoba, and is a leading independent compounding pharmacy servicing both corporately owned and independent pharmacies, and veterinarians in Canada. CPM had revenues of approximately $6.4 million and Adjusted EBITDA of approximately $2.5 million, for the trailing twelve months ending September 30, 2024. All pro-forma numbers related to CPM referenced herein are unaudited figures.

Highlights of the Transaction:

• New facility located in Manitoba is expected to provide greater scale and capacity for growth in the company’s pharmacy business unit
• Expected to further diversify the Company’s customer mix ranging from independent and corporately owned pharmacies to veterinarians
• Expands the company’s product offerings in the human compounding market
• Expected to be immediately accretive to revenue, Adjusted EBITDA and earnings per share
• Total consideration of $22.5 million paid as follows:
• $19.8 million in cash provided by cash on hand and new term loans
• $2.7 million of Grey Wolf common shares issued to the vendors, representing 10.2 percent dilution to the company

“We believe CPM is complementary to our Trutina acquisition that we completed in 2021 and provides the ability to expand our existing business in both the veterinarian and human compounding pharmacy markets from a new facility near Winnipeg” said Angela Cechetto, chief executive officer of the company.

Pursuant to the transaction, Grey Wolf acquired all of the issued and outstanding shares of CPM for $22.5 million. The transaction includes the acquisition of CPM’s 25,000-square-foot facility and associated land. Excluding the appraised value of the real estate, the purchase price represents approximately 7.0 times CPM’s trailing twelve-months Adjusted EBITDA ended September 30, 2024.  The purchase price, paid at close, takes into account certain working capital and other adjustments. Grey Wolf did not pay any finder’s fees associated with the transaction.

At closing, Grey Wolf paid consideration of $19.8 million in cash (the “cash consideration”) and issued an aggregate of 3,160,112 common shares (the “consideration shares”) of Grey Wolf at a deemed issued price of $0.8544 per share.  The cash consideration was financed with cash on hand and two new five-year term loans (“Term Loan 1 and Term Loan 2”) totaling $18.7 million from the company’s existing lender, CWB Maxium Financial Inc. Both loans bear interest at a rate of 7.09 percent.  Term Loan 1 is comprised of $14.3 million and is amortized over 12 years.  Term Loan 2 is comprised of $4.4 million and is amortized over 25 years and facilitates the purchase of the land and building associated with the Transaction.

The consideration shares are subject to a voluntary twelve-month lock-up with customary terms and conditions.

Kevin Palmer, chief financial officer of Grey Wolf, commented, “We expect the transaction to be immediately accretive to revenue, Adjusted EBITDA and earnings per share. We are pleased with the ongoing support from Canadian Western Bank and will continue to prudently manage our balance sheet. Adding the new term loans to Grey Wolf’s balance sheet as at September 30, 2024 would result in a net debt/Adjusted EBITDA ratio of approximately 3.0x (2.5x excluding real estate) on a trailing 12-month basis for the combined businesses.”