Subsequent Events

3 Months Ended

Mar. 31, 2020

Subsequent Events [Abstract]

Subsequent Events

Subsequent Events

Preferred Stock

On April 30, 2020, we entered into an Investment Agreement (the “Investment Agreement”) with CD&R VFC Holdings, L.P. (the “Purchaser”), an affiliate of Clayton, Dubilier & Rice, LLC, pursuant to which we agreed to issue and sell to the Purchaser, and the Purchaser agreed to purchase from us, 250,000 shares of our 7.50% Series A Convertible Preferred Stock, par value $0.01 per share (the “Series A Preferred Stock”), in a private placement for aggregate gross proceeds of $250 million (such transaction, the “Private Placement”).

The Series A Preferred Stock, once issued, will be convertible into shares of our common stock at a conversion price and a conversion rate set forth in the Certificate of Designations classifying the Series A Preferred Stock, a form of which is attached as Annex I to the Investment Agreement, a copy of which is filed as an exhibit to this Quarterly Report on Form 10-Q. On an as-converted basis, together with the Purchaser's existing common shares of Covetrus, the Purchaser will own approximately 25% of pro forma common shares outstanding. However, the terms of the preferred stock limit the Purchaser's voting interest to 19.99% of our then-outstanding voting interests. Under the terms of the Investment Agreement, the Purchaser will have the right to appoint two designees to our board of directors. We expect to use the net proceeds from the Private Placement to repay a portion of our revolver borrowings, provide additional short-term liquidity, and support general corporate purposes.

Other Transactions

On April 30, 2020, we completed the previously announced combination of our subsidiary, Covetrus Espana, with Distrivet S.A. to form a leading animal-health provider on the Iberian Peninsula. At closing, we made a payment of $11 million and we are obligated to make an additional payment of $11 million on the one-year anniversary. We now own 50.01% of the new company, called Distrivet, a Covetrus company.

Also see Note 3 - Held for Salefor information on the April 1, 2020 closing of the sale of scil to Heska.