The Covetrus building as seen from Fore Street in Portland. Shawn Patrick Ouellette/Staff Photographer

As Covetrus Inc. on Tuesday considers selling to private, out-of-state investors – and ending its rank as Maine’s largest public company – it also is preparing to pay out $35 million over allegations it misled shareholders at the start of that reign.

The sale was scheduled for a shareholder vote during a 10 a.m. meeting. The cash would settle a class-action securities fraud lawsuit against the Portland animal-health company, claiming top executives overstated its financial health when Covetrus launched in February 2019.

A federal judge in New York must still approve the settlement agreement, which was announced a few weeks ago. The OK could come as early as Oct. 25, according to court documents.

The $35 million would represent a hefty recovery for shareholders in the lawsuit. In fact, that amount would have placed among the highest 20 securities class-action payouts last year in the U.S., according to data from Cornerstone Research Inc. Papers filed by the plaintiffs also said the amount would be among the 10 largest security fraud class-action recoveries ever in the U.S. District Court for the Eastern District of New York.

Meanwhile, Covetrus also faces over a dozen more recent lawsuits, filed after the company announced in May that it planned to be acquired for roughly $4 billion by two private equity firms: Clayton, Dubilier & Rice, of New York; and San Francisco-based TPG Capital. The two firms already own 24 percent of Covetrus and are offering $21 for each outstanding share.

The company did not respond to questions about any of the litigation when contacted by the Press Herald, and several experts on similar deals declined to comment on the record for this article.


Covetrus (Nasdaq: CVET) was formed by a merger of Portland-based Vets First Choice and the animal-health division of medical supplier Henry Schein Inc., headquartered in Melville, New York. With 5,500 employees worldwide and 300 in Maine, the combined business provides supplies, management software and prescription technology for veterinary offices.

But the company had a rocky start. The value of Covetrus shares fell sharply from its initial public offering price of $43 and led to some reshuffling of executives. Benjamin Shaw stepped down as president of the company and his father, David Shaw – who had founded Westbrook-based Idexx Laboratories Inc., another veterinary products company – resigned as chairman. He retained a seat on the board.

Since then, Covetrus has been able to regain some of its footing. The company reported revenue of $4.58 billion last year, ranking No. 643 on the Fortune 1000 list of the country’s largest public companies. Had Covetrus cracked the Fortune 500, as some have speculated it soon might, it would have been the first Maine company to make the prestigious list in over a decade.

But if the private sale is completed, the company won’t be in the running.

Some shareholders are opposing the deal, claiming in several lawsuits this summer that Covetrus and its directors are undervaluing the company and not obtaining a good enough price. Other suits contend a Sept. 13 Covetrus proxy statement has provided “incomplete and misleading information” about the sale.

Last week, the company amended its proxy statement, adding specific dollar figures to explanations of why Goldman Sachs – the Covetrus financial adviser – recommended the deal to company executives. The initial statement, in many cases, didn’t include the dollar amounts the advisers had considered.

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