Bayer to Sell Animal-Health Unit to Elanco for $7.6 Billion -- 2nd Update
August 20 2019 - 7:57AM
Dow Jones News
By Ruth Bender
BERLIN -- Bayer AG is selling its animal-health business to an
American rival for $7.6 billion, part of the German
drug-and-chemicals giant's plan to divest assets amid mounting
legal liabilities from its Roundup herbicide.
The deal to sell the unit to Elanco Animal Health Inc., based in
Greenfield, Ind., would create a new industry heavyweight in the
business of preventing and treating diseases for pets and
livestock. The combined company would have a market share of
roughly 13%, making it the second-largest animal-health company by
revenue behind U.S. rival Zoetis Inc. and ahead of German,
family-owned Boehringer Ingelheim, according to Germany's Baader
Bank.
Elanco was a division of Eli Lilly & Co. until the U.S.
pharmaceutical company sold a minority stake in the operation in
September 2018 through an initial public offering. The deal for
Bayer's animal-health unit, which will double its pet business and
strengthen its presence in emerging markets and in the cattle
business, is Elanco's largest since going public.
Several private-equity firms had also expressed an interest in
the Bayer unit, according to people familiar with the matter.
Bayer said it would get $5.3 billion in cash and retain a stake
worth $2.3 billion in Elanco, which it plans to exit over time.
Bayer's share price has slumped since it lost a string of jury
trials that argued that the Roundup weedkillers it bought as part
if its acquisition of Monsanto cause cancer. More than 18,000
plaintiffs have now filed similar suits.
The German company said in December it was exploring options to
exit its animal-health business, the smallest of its four units.
The move is part of a wider plan to shed operations that are
diverting resources and management time from its core and bigger
drugs and agriculture divisions, save costs and bring down
debt.
The sale will help the Leverkusen, Germany-based company chip
away at its debt load of around EUR35.7 billion ($39.56 billion),
which soared last summer with the acquisition of U.S. agriculture
giant Monsanto.
The deal is also a crucial step in Bayer's efforts to regain
investor confidence after a majority of shareholders signaled in
April a lack of confidence in how the company is being run in the
wake of its big bet on Monsanto.
Bayer Chief Executive Werner Baumann has come under intense
pressure from shareholders, who have accused him of underestimating
the legal and reputational risks of the deal. Bayer has said it
acted conscientiously in its due diligence for that deal.
Bayer's share price has dropped roughly 30% since the
acquisition. So far, Bayer has lost three jury trials, raising
fears that it could face billions in liabilities.
Bayer is appealing the first verdicts and argues that Roundup
and its active ingredient, glyphosate, are safe. But shareholders
have grown more frustrated with every loss in court, prompting
Bayer in June to hire a prominent U.S. lawyer to help to advise its
board on trial tactics and mediation.
Amid uncertainty over how much the lawsuits might end up costing
the company, shareholders have said Bayer must deliver on its
restructuring plans. The Elanco deal is the last of a series of
asset sales to be completed and a deal was reached earlier than
Bayer had forecast.
In recent months, Bayer sold its 60% stake in chemical park
operator Currenta, Coppertone sunscreens and Dr. Scholl's foot-care
products. The Elanco deal is expected to close in mid-2020, pending
regulatory clearance.
Bayer shares rose slightly on the announcement of the sale,
trading up 0.9% mid-morning. Analysts say the Roundup lawsuits
would continue to weigh on the company's stock until they run their
course or Bayer decides to settle, allowing the market to put a
price on the total liability.
--Ben Dummett contributed to this article.
Write to Ruth Bender at Ruth.Bender@wsj.com
(END) Dow Jones Newswires
August 20, 2019 07:42 ET (11:42 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
Elanco Animal Health (NYSE:ELAN)
Historical Stock Chart
From Mar 2024 to Apr 2024
Elanco Animal Health (NYSE:ELAN)
Historical Stock Chart
From Apr 2023 to Apr 2024