US antitrust regulator sues to halt Cencora's $3.5 billion MWI sale to Covetrus

what happened

On Friday, the Federal Trade Commission asked a New York federal court to stop Cencora from selling its MWI Animal Health unit to Covetrus for $3.5 billion. The agency argues that merging the two biggest US distributors of veterinary drugs and clinic supplies would push up prices for clinics and pet owners, since the rivals now compete hard for customers with discounts and rebates.

Attorneys general from 13 states joined the case. Covetrus replied that the agency relies on a narrow and dated picture of the market and said it is prepared to defend the transaction in court. Cencora had not responded to a request for comment when Reuters reported the story.

why it matters

For investors, the central question is whether Cencora can close the sale. J.P. Morgan analysts do not expect the challenge to damage the company's outlook, though they think it could seek other ways to divest MWI if the deal is blocked. The stock gained roughly 2% in midday trade.

market impact

Cencora: the risk of the MWI sale being blocked weighs on the stock, though analysts see no hit to guidance

• ↔Cencora shares mixed — risk the sale collapses is offset by analysts seeing no damage to the forecast

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