Covetrus (CVET) Receives $21 Per Share Offer from Clayton, Dubilier & Rice and TPG

May 20, 2022 8:06 AM EDT

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(Updated - May 20, 2022 8:07 AM EDT)

Covetrus (NASDAQ: CVET) shareholder CD&R VFC HOLDINGS, L.P. disclosed:

On May 19, 2022, Clayton, Dubilier & Rice, LLC and TPG (together, the “Sponsors”) submitted a letter setting forth a non-binding proposal to acquire all of the outstanding shares of Common Stock of the Issuer that are not owned by the Sponsors or their affiliates for cash consideration of $21.00 per share of Common Stock (the “Proposal”) to a transaction committee of the board of directors of the Issuer (the “Board”) comprised of non-management directors that are independent of the Reporting Persons and their affiliates (the “Transaction Committee”).

The Proposal does not create any legal obligations and no such obligations will arise unless and until definitive transaction documentation with the Issuer has been executed and delivered. No binding obligation on the part of the Reporting Persons or any of their affiliates will arise with respect to the filing of this Schedule 13D. While the Proposal remains under consideration by the Transaction Committee, the Reporting Persons and their affiliates expect to respond to inquiries from, and negotiate the terms of the Proposal with, the Transaction Committee and its representatives. The Reporting Persons do not intend to provide additional disclosures regarding the Proposal until a definitive agreement has been reached or unless disclosure is otherwise required under applicable U.S. securities laws. Affiliates of the Reporting Persons and of TPG also expect to continue to engage in discussions and negotiations with potential financing sources and enter into one or more definitive debt commitment letters with third parties and equity commitment letters with their managed investment funds.

The Proposal may result in one or more of the transactions, events or actions specified in clauses (a) through (j) of Item 4 of Schedule 13D, including, without limitation, an acquisition of additional securities of the Issuer, an extraordinary corporate transaction (such as a merger) involving the Issuer, delisting of the Common Stock from the Nasdaq Global Select Market and other material changes in the Issuer’s business or corporate structure.

Prior to the making of the Proposal, on May 19, 2022, the Issuer granted CD&R Holdings a limited waiver (the “Limited Waiver”) of the standstill restrictions contained in the Investment Agreement in order to permit the submission of the Proposal, as well as to permit CD&R Holdings to pursue, develop and, if later approved by the Board upon the recommendation of the Transaction Committee, enter into the transaction contemplated by the Proposal.

No assurances can be given that a definitive agreement will be reached or that the transaction contemplated by the Proposal will be consummated. The Sponsors reserve the right to modify or withdraw the Proposal at any time. Subject to the restrictions set forth in the Investment Agreement, as modified by the Limited Waiver, the Reporting Persons reserve the right to formulate other plans or make other proposals which could result in one or more of the transactions, events or actions specified in clauses (a) through (j) of Item 4 of Schedule 13D, and to modify or withdraw any such plan or proposal at any time. Subject to the restrictions set forth in the Investment Agreement, as modified by the Limited Waiver, if the transaction contemplated by the Proposal is not consummated, the Reporting Persons and their affiliates will continue to regularly review and assess their investment in the Issuer and, depending on market conditions and other factors, may determine, from time to time, to engage in any of the events set forth in clauses (a) through (j) of Item 4 of Schedule 13D.

The foregoing descriptions of the Proposal and the Limited Waiver do not purport to be complete and are subject to, and qualified in its entirety by, the full text of such documents, which are attached hereto as Exhibits 99.8 and 99.9, respectively.

Clayton, Dubilier & Rice, LLC and TPG Global, LLC

May 19, 2022

Transaction Committee of the Board of Directors

Covetrus, Inc.

7 Custom House St.

Portland, Maine 04101

Dear Members of the Transaction Committee of the Board of Directors:

Pursuant to and in accordance with the limited standstill waiver that has been granted under the Investment Agreement, dated as of April 30, 2020, by and among Covetrus, Inc., a Delaware corporation (the “Company”) and CD&R VFC Holdings, L.P., a Cayman Islands exempted limited partnership (“CD&R Holdings”), Clayton, Dubilier & Rice, LLC (“CD&R”), on behalf of its managed investment funds (the “CD&R Funds”), and TPG Global, LLC (“TPG” and together with CD&R, the “Sponsors”), on behalf of its managed investment funds (the “TPG Funds” and, together with the CD&R Funds, the “Sponsor Funds”) are pleased to submit this non-binding proposal to acquire all of the outstanding shares of common stock (the “Common Stock”) of Covetrus, Inc. (the “Company”) not already owned by the CD&R Funds for cash consideration of $21.00 per share (our “Proposal”). Our Proposal is informed by prior exploratory discussions with the Transaction Committee of the Board of Directors (the “Transaction Committee”) and its advisors regarding a potential transaction, as well as our review of due diligence information provided as part of this exploratory process.

We believe that our Proposal, which represents a 35% premium to the Company’s 30-day VWAP, reflects an extremely attractive value for the Company’s public stockholders. Our Proposal provides the Company’s stockholders with an opportunity to derisk their investment in the Company by obtaining immediate liquidity and certainty of value at a significant premium to the current share price and recent trading levels.

Our Proposal assumes a recapitalization of the Company’s indebtedness with new debt financing to be arranged by the Sponsors. The equity financing to support the Proposal would be funded by the rollover of CD&R Holding’s existing 24.2% common stock ownership interest in the Company and new cash equity to be provided by the CD&R Funds and the TPG Funds.

This Proposal has been approved by the investment committees of both CD&R and TPG. While we believe we have maximized the certainty of our Proposal and our ability to move expeditiously toward signing with finalization of our work, our Proposal does remain subject to the negotiation and execution of mutually acceptable definitive agreements. Concurrently with the delivery of this offer letter, we have separately provided to your advisors copies of a markup of the draft merger agreement provided by your counsel as well as forms of equity and debt commitment letters, and we are confident that we will be able to reach agreement on definitive transaction documents on an expedited basis.

Our Proposal is a non-binding expression of interest only and does not constitute an offer subject to binding acceptance. We reserve the right to withdraw or modify our Proposal at any time. No legal obligation with respect to our Proposal or any other transaction shall arise unless and until we have executed definitive transaction documentation with the Company. As required by applicable law, CD&R intends to promptly file an amended Schedule 13D reflecting the submission of this Proposal.

We look forward to working with the Transaction Committee and its advisors to complete our confirmatory due diligence and the negotiation and execution of mutually acceptable definitive agreements.


Sincerely,

/s/ Sarah Kim

Sarah Kim
Partner, Clayton, Dubilier & Rice, LLC

/s/ Ravi Sachdev

Ravi Sachdev
Partner, Clayton, Dubilier & Rice, LLC

/s/ Jeffrey K. Rhodes

Jeffrey K. Rhodes
Co-Managing Partner, TPG Global, LLC

/s/ Kendall R. Garrison

Kendall R. Garrison
Partner, TPG Global, LLC

Exhibit 99.9

May 19, 2022

CD&R VFC Holdings, L.P.

c/o Clayton, Dubilier & Rice, LLC

375 Park Avenue, 18th Floor

New York, New York 10152

Attention: Sarah Kim

Email: [email protected]

Re: Investment Agreement – Limited Waiver

Ladies and Gentleman:

Reference is made to that certain Investment Agreement, dated as of April 30, 2020 (the “Investment Agreement”), by and among Covetrus, Inc., a Delaware corporation (the “Company”) and CD&R VFC Holdings, L.P., a Cayman Islands exempted limited partnership (“CD&R Holdings” and, together with its Affiliates, the “CD&R Investors”). Capitalized terms used and not otherwise defined herein shall have the meanings given to such terms in the Investment Agreement.

Prior to the date hereof, the Board of Directors of the Company (the “Board”) established a transaction committee (the “Transaction Committee”) for the purpose of, among other things, considering whether it would be appropriate for the Company to consider a potential transaction in which a third party, including one or more of the CD&R Investors, would acquire all of the outstanding shares of Common Stock of the Company (a “Potential Transaction”). Acting upon the unanimous recommendation of the Transaction Committee, the Company hereby waives, and shall not enforce, the obligations of CD&R Holdings and its Affiliates pursuant to Section 5.07 of the Investment Agreement as and solely to the extent necessary to permit one or more of the CD&R Investors, together with TPG Global, LLC and its Affiliates, to (i) make a proposal to the Company (which shall be directed to the Transaction Committee) for a Potential Transaction (the “Proposal”); (ii) publicly disclose that one or more of the CD&R Investors has made the Proposal to the Company, along with the CD&R Investors’ intention to seek to engage in the Potential Transaction referenced in the Proposal, by filing amendments to the statements on Schedules 13D and 13D/A previously filed by the CD&R Investors, as applicable, in compliance with the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (provided that the CD&R Investors shall provide the Company with a reasonable opportunity to review and comment on drafts of such amendments and shall consider in good faith all comments reasonably proposed by the Company in connection therewith), and (iii) to further engage with the Company (through the Transaction Committee, unless otherwise directed) to pursue, develop and, if later approved by the Board upon the recommendation of the Transaction Committee, enter into the Potential Transaction, including negotiating the terms thereof, conducting due diligence, obtaining financing and engaging in other reasonably necessary activities customarily associated with the negotiation of a consensual transaction in the nature of the Potential Transaction (the “Limited Waiver”). It is explicitly understood and agreed that the Limited Waiver may be revoked at any time in the Company’s sole discretion (acting through the Transaction Committee, unless the Transaction Committee otherwise determines) prior to the execution of a definitive transaction agreement between the Company and one or more of the CD&R Investors with respect to the Potential Transaction (a “Definitive Agreement”) or in the event the parties determine to cease discussions relating to the Proposed Transaction; provided that, if a Definitive Agreement is terminated for any reason, the right of the Company (acting through the Transaction Committee, unless the Transaction Committee otherwise determines) to revoke the Limited Waiver shall be restored in all respects, it being understood that no such revocation shall retroactively invalidate any statement or action of any CD&R Investor made or taken during the period during which the Limited Waiver was in effect so long as such statement or action was not, at the time made or taken, in breach of the Limited Waiver. The Limited Waiver is in full reservation of, and without any waiver of or agreement not to enforce, all other rights and obligations in the Investment Agreement, which remains in full force and effect in all other respects.


This letter agreement may be executed in any number of counterparts, each of which when executed and delivered shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. The exchange of a fully executed letter agreement (in counterparts or otherwise) by electronic transmission in .PDF format or by facsimile shall be sufficient to bind the parties to the terms and conditions of this letter agreement. This letter agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, without giving effect to the principles of conflicts of law thereof. For purposes of this letter agreement, the term “affiliate” shall be as such term is defined under the Exchange Act and the term “person” shall be broadly interpreted to include any corporation, partnership, group, governmental body, individual or other entity.

[Signature Pages Follow]


Very truly yours,
COVETRUS, INC.

/s/ Benjamin Wolin

By: Benjamin Wolin
Title: President and Chief Executive Officer

Limited Waiver


ACKNOWLEDGED AND AGREED
AS OF THE DATE FIRST SET
FORTH ABOVE BY:
CD&R VFC HOLDINGS, L.P.
By: CD&R Investment Associates IX, Ltd., its general partner

/s/ Rima Simson

By: Rima Simson
Title: Vice President, Treasurer and Secretary
Cc:
Debevoise & Plimpton LLP 919 Third Avenue
New York, NY 10022
Attention: Paul S. Bird
Email: [email protected]


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