JAB strengthens its grip on the US pet care market with an insurance agreement

JAB Holding has tightened its grip on the booming US pet care industry with a $1.4 billion investment in the pet insurance business of Fairfax Financial Holdings, a week after US regulators have expressed concern about the European private equity firm’s growing influence in the US veterinary market.

JAB has acquired stakes in two Fairfax companies, taking over its interests in Crum & Forster Pet Insurance Group and Pethealth in a deal announced Monday.

The investment comes a week after U.S. Federal Trade Commission regulators intervened in JAB Consumer Partners’ acquisition of SAGE Veterinary Partners, forcing investment vehicle JAB to divest its veterinary clinics in Texas and California to prevent it from forming local monopolies. JAB must also advise the agency for future clinic acquisitions.

JAB began acquiring US veterinary clinics in 2019 and has since entered the $2.8 billion North American pet insurance market, challenging rivals such as Mars and Nestlé. In-force premiums in the industry more than doubled between 2018 and 2021, according to the North American Pet Health Insurance Association (Naphia).

Stuck at home during lockdowns, Americans have increased their spending on pets, with ownership rising from 67% to 70% of US households between 2019 and 2021, according to the National Pet Ownership Survey.

From 175mn of North American pets. only 4.4 million are insured, according to Naphia, offering substantial room for growth.

By taking over Fairfax’s interests in the pet insurance business, JAB will pay $1.15 billion in cash and $250 million in vendor notes. As part of the deal, Fairfax will invest $200 million in JAB’s JCP V consumer fund.

The group, which also owns brands such as Pret A Manger, Krispy Kreme and Panera Bread, estimates revenue and gross written premiums from its global pet insurance investments will exceed $1.2 billion. here 2023.

Dirk Beeckman, Managing Director of JAB’s Pet Insurance Portfolio, said: “Today’s transaction is a major milestone for us in our mission to become a global leader in pet insurance. and the companion animal health ecosystem.

Prem Watsa, Founder, President and Chief Executive Officer of Fairfax, said, “We expect JAB to soon become a global leader in pet health and insurance.

The transaction is expected to close in the second half of the year.

The Financial Times reported last year that JAB, which manages the fortune of the German billionaire Reimann family, was seeking to raise a $5 billion fund to expand its wave of deals in the sector.

However, Holly Vedova, director of the FTC’s Competition Bureau, warned that “private equity firms are increasingly engaging in deployment strategies that allow them to accumulate power off the radar of the commission,” and that under its recent order on the acquisition of SAGE, JAB must also obtain the agency’s pre-approval for future agreements to acquire specialty or emergency veterinary clinics.