Patterson Companies stock launched to a 13-month high Wednesday after the dental outfit said it agreed to a $4.1 billion takeover deal from Patient Square Capital.
Analysts were surprised at the deal's timing, which came less than a week after Patterson Companies announced its plan to seek alternatives on Dec. 5. The deal values Patterson stock at $31.35 per share, representing a 49% premium to the 30-day volume-weighted average price ending on Dec. 4.
"In hindsight it seems conversations with Patient Square were likely already in their late stages, hence the earnings call disclosure," William Blair analyst Brandon Vazquez said in a client note. "Overall, we think this is a solid outcome for Patterson shareholders' immediate returns at a healthy takeout multiple, especially in the context of weak end-markets."
Could This Reinvigorate Dental Names?
Patterson stock has been under pressure this year, falling nearly 19% on a year-to-date basis prior to the deal's announcement Wednesday. In fact, says Vazquez, most dental companies are trading at or near 15-year lows "as investor appetite has waned on a space with years of macro headwinds."
But the Patterson Companies acquisition could help change that.
"We wonder if Patterson's acquisition can create a floor on valuations and help drive incremental demand in the dental space," he said. "In our view, the takeout can give some credence to not only valuations but the eventual rebound of end-markets, leaving many of these dental names at attractive risk/reward levels."
Patterson stock surged 35.9% to 31.40 at the stock market's close. Shares reached their highest point since November 2023.
The deal gives Patterson Companies 40 days to shop around for other buyers. But Evercore's Anderson says it's unlikely the company will be the subject of a bidding war.
"While it is possible that PDCO could be an interesting asset for a strategic buyer (was consensus opinion post last week), we see that potential as somewhat muted given a combination of either antitrust concerns or other strategic plans and see Patient Square as likely to prevail."
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