- Elanco Animal Health said on Tuesday it would buy Bayer's veterinary drugs unit in a cash and stock deal valued at $7.6 billion.
- The deal would create the second-largest animal health business and expanding Elanco's reach in the pet e-commerce space.
Elanco Animal Health agreed to buy Bayer's veterinary drugs unit on Tuesday in a cash and stock deal valued at $7.6 billion, creating the second largest animal health business and expanding Elanco's reach online.
The deal is the latest in the fast-growing animal health market, which has recently seen Elanco floated by Eli Lilly and rival U.S. drugmaker Pfizer also spinning off its veterinary medicine business.
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It also adds to the list of assets sold by Bayer, as the German company looks to slash debt after its $63 billion takeover of seed maker Monsanto last year.
Elanco said it expected the transaction to close by the middle of 2020.
The two companies said Bayer would receive $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 Aug. 6.
Elanco said the stock amounted to 68 million shares, or a stake of about 18.2% based on Refinitiv data, but the number of shares could rise or fall by as much as 7.5%, depending on Elanco's share price performance on the closing date.
The price tag implies a multiple of 18.8 times adjusted core earnings, Bayer said, adding it would sell the equity stake over time.
Reuters reported last month that Bayer had approached Elanco to discuss a possible combination that would be number two after industry leader Zoetis and ahead of unlisted Boehringer Ingelheim — which bought animal health assets from drugmaker Sanofi — and drugmaker Merck.
Market researchers expect the $44 billion animal health sector to grow 5% to 6% per year, driven by an increase in livestock farming and, more importantly, by more people wanting to own pets and spending more money on their well-being.
Bayer is the world's largest maker of flea and tick control products for cats and dogs, with Elanco praising its "top presence on Amazon" with "industry-leading e-commerce/retail capabilities."
"The move combines our long-standing focus on the veterinarian, while meeting pet owners changing expectation of pet care and access to products," said Elanco CEO Jeffrey Simmons.
Bayer has recently sold its 60% stake in a chemical park operator as well as consumer health brands Dr. Scholl's and Coppertone.