Elanco Animal Health (Greenfield, Ind.; www.elanco.com) has entered into a definitive agreement to acquire Bayer’s Animal Health business, Bayer AG (Leverkusen, Germany; www.bayer.com) announced on Tuesday. The transaction is valued at $7.6 billion, consisting of $5.3 billion in cash, subject to customary purchase price adjustments, and $2.3 billion in Elanco stock based on the unaffected 30-day volume weighted average price as of August 6, 2019. The value of the equity consideration is fixed within a 7.5% collar. The transaction value represents an implied multiple of 18.8x based on the 12 months EBITDA before special items of Bayer Animal Health as of June 30, 2019. The divestment is expected to be concluded in mid-2020 subject to the satisfaction of customary closing conditions, including antitrust clearance. Bayer intends to exit its stake in Elanco over time.
“This transaction enhances our focus as a global leader in life sciences,” says Werner Baumann, chairman of the Board of Management of Bayer AG. The exit of the Animal Health business marks the largest transaction in the series of portfolio measures initiated by Bayer in November 2018. The company had previously announced the divestiture of its Consumer Health brands Coppertone and Dr. Scholl’s, along with the sale of its 60% stake in German site services provider Currenta. “We are therefore delivering ahead of schedule on one of the key priorities for driving value creation that we communicated at our Capital Markets Day in December 2018”, says Baumann.
The combination is highly complementary and creates the number two animal health company, with top three positions across a broad range of species and geographies. It also enhances Elanco’s portfolio of leading global brands and bolsters its innovation capabilities and R&D pipeline.
“I have tremendous respect for the Bayer Animal Health team and their shared passion for improving the health and well-being of animals,” says Jeffrey N. Simmons, president and CEO of Elanco. “Combining Elanco’s strong relationship with veterinarians and Bayer’s leadership in retail and e-commerce will ultimately benefit all our customers. We look forward to joining our complementary portfolios and capabilities to build a fully focused animal health company, providing a sustained flow of innovation for farmers, veterinarians and pet owners.”
Bayer’s Animal Health business is a global leader in the segment with sales of $1.8 billion in fiscal 2018. It develops and markets innovative products and solutions to prevent and treat diseases in companion and farm animals. The Advantage family of flea, tick and worm control products, for instance, has been among the most successful products on the market for years. In addition, the innovative Seresto collar is one of the fastest-growing products in this area.