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Mergers & Acquisitions

Elanco to buy Bayer’s animal health business for $7.6 billion

Deal will create the second-largest animal health company after Zoetis

by Marc S. Reisch
August 21, 2019 | APPEARED IN VOLUME 97, ISSUE 33

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Credit: Shutterstock
Demand for companion animal care products is growing rapidly, Elanco says.

Bayer has reached a deal to sell its animal health business to Elanco for $7.6 billion. The transaction will make Elanco the second-largest purveyor of animal health products after Zoetis.

For Bayer, the deal caps a series of job cuts and asset divestments that it outlined in November to enhance its core pharmaceutical and crop-protection businesses. The agreement also raises cash to help pay off the firm’s $63 billion acquisition of Monsanto and deal with legal liabilities for the herbicide Roundup.

The deal continues a trend of drug makers leaving the animal health business. Elanco was a division of Eli Lilly and Company until the drug company sold a 20% stake in an stock offering earlier this year. Pfizer spun off Zoetisin 2013, and Sanofi shed its animal health business in 2016.

“This combination will join two complementary animal health-focused entities previously under the human pharma umbrella into a dedicated company focused on farmers, veterinarians, and pet owners,” Elanco CEO Jeffrey N. Simmons says.

Elanco says the acquisition will bring it $1.7 billion in annual sales of products including flea and tick treatments, injectable antibiotics, and deworming therapies. Bayer’s portfolio will increase Elanco’s sales to $4.8 billion and double the size of its companion animal business to nearly half of its overall sales.

In addition, Elanco will pick up 4 Bayer R&D sites along with a pipeline of “significant” R&D projects and access rights to Bayer’s human- and crop-related R&D pipeline.

Bayer chairman Werner Baumann says the deal, expected to be completed in mid-2020, will allow his firm to focus on being a life sciences leader, yet disgruntled shareholders are instead focused on the 18,400 Roundup users who are suing Bayer, claiming the herbicide made them ill.

Many Bayer shareholders voted against the way the company is being run at the its annual shareholder’s meeting in June. And some may be hoping that settlement talks with plaintiff’s lawyers will succeed and let the firm return its attention to business. In May, a US judge appointed well-known mediator Kenneth R. Feinberg to referee the settlement talks.

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