JetTrack provides data on corporate aircraft flight activity used to identify future corporate deals. The data is available via web platform and API.
Use Case: Patterson (PDCO) Buyers
In early March 2018, Patterson Companies Inc. (PDCO) announced it had missed projected earnings, sending its stock tumbling 25.9% year over year. This announcement came quickly on the heels of other bad news: The FTC filed a complaint just more than 2 weeks earlier alleging that Patterson had conspired with competitors to prevent discounts to segments of the market.
It was a bad stretch for Patterson, and the tumbling stock price only stoked takeover/acquisition rumors that had abounded for years. Patterson operates primarily in two markets: dental supplies and animal health. As far back as 2014, Seeking Alpha speculated Patterson would be a prime takeover target. More recently, in 2017, Seeking Alpha doubled down on that speculation.
But what companies would be interested in acquiring Patterson? Conventional wisdom holds that 4 companies have the ability and motivation to make the deal: Amazon (AMZN), AmerisourceBergen (ABC), McKesson (MCK) and Cardinal Health (CAH).
As speculation continues in the lead-up to a possible acquisition, JetTrack can help keep a closer eye on these 4 companies, capturing signals that one of them may be closing in on a deal.
Here’s a look at the 4 companies and what JetTrack can share about their Patterson-related activity.
Amazon is disrupting all sorts of markets. Bookstores are limping along or closing altogether as Amazon takes more market share through its original role as online bookseller. Department stores are struggling as more and more consumers turn to the convenience of online shopping. And even grocery stores are feeling the pinch as Amazon moves deeper into their territory.
In December 2017, a Morgan Stanley analyst downgraded shares in both Patterson Companies and competitor Henry Schein as it became more likely that Amazon would enter the dental supplies market. An earlier analysis from Barron’s also suggested that Amazon would struggle to “meaningfully penetrate” the dental supplies market without an acquisition. Could Patterson be Amazon’s acquisition target?
What does JetTrack see? Amazon executives flew to the Twin Cities (where Patterson is headquartered) on Friday, Feb. 2, 2018. Of course, that flight was a month before the announcement that Patterson had missed its earnings projection, sending the stock spiraling and making the company a much more attractive takeover target.
AmerisourceBergen is one of the Big 3 pharmaceutical distributors, along with McKesson and Cardinal Health. In fact, as of 2016, AmerisourceBergen was the second-largest drug distributor in the United States, earning $142.1 billion in revenue — a 6.3% increase over 2015.
Why would these Big 3 pharmaceutical distributors have interest in an animal health and dental supplies distributor like Patterson? For two reasons: 1) The animal health market is undoubtedly growing, and 2) the margin on Patterson’s dental supplies are about twice what the pharmaceutical distributors enjoy on their core business.
What does JetTrack see? Dating back to summer 2016, AmerisourceBergen executives have spent quite a bit of time in the Twin Cities area. In fact, JetTrack’s database includes 9 AmerisourceBergen flights to the Twin Cities, the most recent of which took place on Monday, Feb. 5, 2018.
That said, AmerisourceBergen executives have made no return flight to the Twin Cities since Patterson’s March 1 earning’s call. And, as documented in previous case studies, it’s important to note the rarity of a company’s flights to a certain destination. There’s nothing rare about AmerisourceBergen flight to the Twin Cities, making it harder to read much into this recent activity.
Not only was McKesson the largest American drug distributor by revenue in 2016 ($153.8 billion), it also has another unique tie to Patterson Companies. In late 2017, Patterson named McKesson executive Mark Walchirk as its new president and chief executive officer.
The hiring of a former McKesson executive as CEO of Patterson doesn’t make an acquisition or takeover any more or less likely. But the familiarity that accompanies this key transition is certainly an interesting development that should be noted.
What does JetTrack see? The JetTrack database includes only a single flight by McKesson executives to the Twin Cities area. That flight took place on Sept. 28, 2016. If McKesson is interested in taking over Patterson, its leadership has not visited Patterson’s headquarters once via private plane to further explore that interest.
Cardinal Health shares at least one thing in common with Patterson Companies — Morgan Stanley analysts think Amazon is a serious threat to both. In November 2018, Morgan Stanley downgraded Cardinal Health, suggesting that its risk was larger than AmerisourceBergen’s or McKesson’s as Amazon looked more closely at scaling its medical supply distribution business.
What does JetTrack see? JetTrack provides 2 major benefits to users. First, it helps pinpoint specific flights at specific times, which can be incredibly helpful when analyzed within the context of other news and information. And, second, JetTrack demonstrates just how rare flights are by certain companies to specific destinations.
If a company constantly visits a specific destination (as AmerisourceBergen does the Twin Cities), a visit there might just be business as usual. But, if a company rarely visits a specific destination but then starts visiting it regularly in alignment with rumors, that’s a signal worth following.
And that’s exactly what JetTrack shows here. Cardinal Health has visited the Twin Cities only 3 times dating back to summer 2016. One visit took place on Dec. 12, 2016, but the other 2 took place more recently — once on Feb. 2, 2018, and then again on March 9, 2018.
Amazon, AmerisourceBergen and Cardinal Health all visited the Twin Cities between Feb. 2 and 5, which is an interesting finding. But, perhaps more interesting, Cardinal Health is the only company to make a return visit after that — this visit coming just a week after Patterson’s call sent its stock plunging.
On both Feb. 2 and March 9, the Cardinal Health plane landed in the morning and then left in the afternoon, giving executives just a few hours to spend in the Twin Cities area.
The Difference JetTrack Makes in Investment Decisions
Only time will tell what company ultimately acquires Patterson, if Patterson is bought at all. In the meantime, analysts will be competing for actionable information. And, the more indications that a company is likely to be the acquirer, the more confident a play any investor can make in betting on an acquisition.
JetTrack is just one tool that can be used to look for signals, but it can be an important tool when tracking possible mergers and acquisitions. And, in the case of Patterson and a potential takeover, JetTrack could be the one tool that gives investors a competitive advantage over others.