Private Equity Giant’s Pet Care Buying Spree Spurs Monopoly Fears
Regulators took action amid concerns that animal owners — and their pets — could lose out
By Sunny Nagpaul
The giant Luxembourg-based private equity firm JAB Holding Co. — best known for food brands like Krispy Kreme doughnuts, Dr Pepper soda and Pret A Manger and Panera Bread restaurants — has been trying to gobble up the United States’ pet health industry.
The company said in 2023 that it and its subsidiaries insured more than 3 million pets around the globe, owns more than 1,500 veterinary hospitals, pet resorts and clinics — and it aims to keep expanding.
But the outfit’s rapid growth in the pet health care industry has raised concerns among federal regulators about the creation of potential monopolies in some American cities that could lead to higher prices and poorer care for pets.
The company, through subsidiaries, has been buying pet insurance providers as well as animal clinics and hospitals across the country over the past five years.
But two massive deals for veterinary clinics and hospitals — worth a total of $2.75 billion — heightened regulators’ concerns and spurred federal action.
The first was an acquisition reached in 2021 by a JAB subsidiary to buy SAGE Veterinary Partners, a chain of animal hospitals, for $1.1 billion.
The Federal Trade Commission in 2022 alleged that parts of one acquisition was illegal because they would lessen competition and create monopolies in some areas of the country. The agency expressed particular concern about rising costs and diminished care for pets.
“After conducting a thorough investigation here, the Commission determined it had reason to believe that this deal — JAB’s proposed acquisition of SAGE — was illegal,” Lina M. Khan, the FTC chair, said in a June 2022 prepared statement. A set of consent agreements reached in 2022 required JAB to sell off some of its clinics and cooperate with a monitor tasked with overseeing the sales.
The second was a $1.65 billion deal signed in 2021 for a JAB company to buy Ethos Veterinary Health, which operates more than 140 hospitals and clinics, mostly in the U.S.
The FTC declined to answer questions or comment beyond its public statements on the acquisitions.
JAB did not respond to repeated requests for comment.
Global Reach
JAB Holding Co., with more than $50 billion in capital, has a portfolio much wider than pet care and insurance. In addition to Krispy Kreme, Panera Bread, Peet’s Coffee, Keurig, Dr Pepper, Snapple, Pret A Manger and Einstein Bros. Bagels, JAB also owns fashion and cosmetic brands such as Calvin Klein, Max Factor, Jimmy Choo, Bally and Belstaff.
A central part of JAB’s capital comes from the Reimann family, whose ancestors founded a chemical and industrial manufacturing company in Germany in the 1800s. Members of that family supported the Nazi regime during World War II, as detailed by several major news organizations.
JAB first entered the world of pet insurance and medical care in 2019, by acquiring veterinary clinic chain Compassion First — whose 41 hospitals and treatment facilities across 13 U.S. states were valued at roughly $1.2 billion, according to a JAB press release.
Four months later, JAB announced another massive acquisition — snapping up National Veterinary Associates, “one of the largest veterinary and pet care services organizations in the world,” with more than 700 animal veterinary hospitals and pet resorts in 43 U.S. states, as well as in Canada, Australia and New Zealand, according to a JAB press release.
‘FTC is Taking Action’
The FTC investigated the mergers, ultimately blasting JAB for cornering the market on veterinary services in some parts of the country. The commission said the consolidation could “cause customers to pay higher prices for, or receive lower quality, relevant services.”
In particular, investigators said JAB was in danger of creating a monopoly in locations that include Asheville, N.C., Greenville, S.C., Norwalk, Conn., Yonkers, N.Y., and Fairfax and Manassas, Va. That meant pet owners in those sites seeking internal medicine, cancer treatments, ophthalmology, surgery or emergency care might have no other options than a JAB-owned facility, the FTC found.
As a result, JAB agreed in 2020 to sell off some of its facilities to another veterinary provider.
JAB continued its expansion by buying the pet insurance branch of Independence Holding Company, headquartered in Connecticut, a key player in the animal insurance industry, for $265 million. That deal was completed in 2021.
Also that year, JAB reached an agreement to buy the Chicago-based Figo Pet Insurance. And JAB struck a deal in 2021 to purchase a majority stake in the United Kingdom-based pet insurer Cardif Pinnacle.
In June 2022, JAB announced that it planned to purchase a third veterinary healthcare company: SAGE, which operated more than 100 veterinary hospitals in Alaska, Arizona, California and Washington.
By that point, JAB’s control over the animal healthcare industry had ballooned into control over more than 1,500 veterinary hospitals, pet resorts, specialty and emergency clinics around the world, according to its press release.
It’s unusual to have two [FTC] actions against one party in the same month.
Unprecedented Oversight
The FTC responded again, warning that JAB’s acquisitions and consolidation could harm animal owners by consolidating control over pet emergency facilities and clinics that specialize in treating cancer and other severe pet illnesses.
But a month later, JAB announced yet another acquisition, this time revealing it was buying Ethos, a group focused on “reimagining veterinary medicine” by developing new diagnostic and therapeutic care as well as creating continuing education programs for veterinarians.
The FTC had had enough — ordering JAB to sell some of the clinics and hospitals it planned to acquire as part of the deal, including in the Denver, Austin, San Francisco, Berkeley and Richmond, Va. metro areas — and to work with a monitor to oversee that process.
“For the second time in a month, the FTC is taking action to prevent private equity firm JAB from gobbling up competitors in regional markets that are already concentrated,” Holly Vedova, the FTC’s director of the Bureau of Competition, said in a statement.
In addition, the FTC ordered JAB and its subsidiaries to agree to unprecedented oversight for the next decade, including asking the FTC’s permission every time it wants to buy a new emergency or specialty vet clinic within 10 miles of its existing sites in Texas or California, according to the FTC order.
Authorities also ordered JAB to give the FTC 30-day advance written notice any time it seeks to buy a facility within 25 miles from any of its sites anywhere else in the U.S., according to the FTC order.
“This provision — the first of its kind in a Commission order — ensures that the FTC will have advance notice of any unreported purchases that would ordinarily escape our review, providing the agency with the opportunity to investigate those transactions before they are consummated,” FTC Chair Lina Khan said in a prepared statement.
‘Unusual’ Pace of Response
Beth Vessel, an antitrust lawyer at the law firm Holland & Knight, said the FTC has recently been taking actions against private equity firms, but added that the actions against JAB weren’t standard fare.
“It’s unusual to have two [FTC] actions against one party in the same month,” Vessel said.
As a condition of JAB’s proposed $1.65 billion acquisition of the parent company of veterinary clinic owner Ethos, the FTC ordered it in June 2022 to divest clinics and hospitals in Richmond, Va., Denver, San Francisco metro areas.
The FTC and JAB reached a set of agreements between August and October of 2022, in which the company agreed to sell off some of its facilities and give the FTC notice before new acquisitions.
JAB’s reach has continued to grow, and in October 2022, the company reached a deal worth almost $1.4 billion to buy the insurance giant Crum & Forster’s pet insurance division.
And in May 2023, JAB announced it was buying a majority interest in the Arizona-based dog and cat insurance provider, Pumpkin Insurance Services, expanding its control to oversee a host of popular pet insurance brands including ASPCA, Hartville and the insurance plans sold by the Petco chain of stores.
