M&A

Elanco to Buy Bayer Animal Health Unit for $7.6B

The deal would make Elanco the second biggest animal health business in the world.
Lauren MuskettAugust 20, 2019

Elanco Animal Health reached an agreement to buy Bayer’s animal health business in a cash and stock deal valued at $7.6 billion.

Elanco said the deal, which it will finance through cash and equity, will double the size of its companion animal business.

“The move combines our long-standing focus on the veterinarian, while meeting pet owners’ changing expectation of pet care and access to products,” Elanco chief executive officer Jeffrey Simmons said in a statement.

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The companies said, under the terms of the agreement, Bayer would get $5.3 billion in cash and $2.3 billion worth of Elanco stock based on a price of $33.60 per share, the 30-day average price as of August 6. Elanco said the stock value resulted in a stake of about 18.2%, but that stake could change depending on Elanco’s share price performance on the closing date.

Bayer said the deal implied a multiple of 18.8 times adjusted core earnings.

Bayer recently sold a majority stake in a chemical park operator and has sold off consumer health brands Dr. Scholl’s and Coppertone as it looks to reduce debt following its $63 billion acquisition of Monsanto. The company is also bracing for a possible settlement of lawsuits stemming from its cancer-causing weed killer Roundup, which analysts project at between $5 billion and $10 billion.

Citi said Bayer sold near the top of the price range its analysts had projected and they expected Bayer to buy back $3.33 billion worth of its stock to offset lower earnings per share.

The animal health sector has been projected to grow between 5% and 6% per year as pet-ownership increases and people spend more on their animals’ health. The market is currently pegged at $44 billion per year.

Goldman Sachs acted as financial advisor to Elanco. A fairness opinion was provided by Duff & Phelps. The transaction is expected to close in mid-2020.

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