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Merck Animal Health, a subsidiary of Merck & Co. (MRK - Get Report) , will become the largest animal health company in Brazil and close to the biggest in the world after acquiring an animal health products provider there for $400 million.
Merck announced July 1 that it has acquired a 93% stake in Motes Claros, Brazil-based Vallee.
According to analyst Louise Chen of Guggenheim Partners, Merck paid 2.9 times Vallee's annual sales. She estimates that Vallee's annual sales to be between $125 million and $150 million.
"With this deal, Merck may become the number one animal health company, with respect to sales, in Brazil," Chen wrote in a note. "That said, we continue to expect Zoetis (ZTS - Get Report) to be the leading Animal Health company worldwide for the foreseeable future."
Chen added that prior to the deal, Vallee was the second-largest animal health company in Brazil behind Ourofino.
According to Merck Animal Health's president, Rick DeLuca, the deal provides Merck with an opportunity to expand in Latin and South America while growing its already large portfolio of animal products.
"Merck Animal Health has a broad portfolio of products to protect against some of the most important pathogens affecting livestock," DeLuca said in the announcement. "We are pleased to complement our portfolio with products from Vallee, which will further strengthen our presence in Latin America and help us respond even more quickly and effectively to the region's needs."
The company's vice president of the Latin America region, Ralph Cabezas, reiterated the importance of Brazil's location and market.
"As one of the largest producers of protein in the world, Brazil is an important market for us," Ralph said in the prepared statement. "Vallee has been a trusted manufacturing partner in this region for a number of years and we are pleased to offer their products to our customers to help protect animals from diseases."
Vallee produces a number of animal health products, including vaccines, parasiticides and anti-infective drugs. The company's products focus more on livestock than on pets and was founded with the goal of creating a foot-and-mouth disease drug.
Vallee has operations not only in Brazil, but also in Paraguay, Venezuela, Bolivia and Mexico.
This deal is the third in the past year for Merck Animal Health.
The company announced that it acquired rights to the Whisper Veterinary Stethoscope System from Geissler Cos. for undisclosed terms on April 19. The stethoscope system is used to detect bovine respiratory disease.
Merck Animal Health also announced the acquisition of Harrisvaccines, a privately vaccine company for food production and companion animals. Terms of the deal, which closed in the fourth quarter of 2015, were also not disclosed.
Merck, which has a market cap of $161 billion, close Tuesday at $58.00 per share, up 6 cents from its open.
Officials from Merck and Vallee couldn't be reached for comment.