Elanco Animal Health, the maker of antiparasitic brands Trifexis and Credelio, has agreed to acquire Bayer Animal Health in a $7.6 billion cash and stock deal that would create the world’s second-largest animal health company.
The transaction, which was announced Aug. 20 after weeks of negotiations, is expected to close in mid-2020 pending regulatory reviews.
The acquisition would greatly expand Elanco’s companion and food animal offerings and open the door to more overseas markets.
“Internationally, we nearly triple our pet business, with an immediate footprint in China,” said Elanco’s president and CEO, Jeffrey N. Simmons, speaking on a conference call. “Also, we gain a strong parasiticide business in Europe and bolster Elanco’s food animal presence in Japan, Mexico, China and the rest of the world.”
Bayer Animal Health is a business unit of Germany-based Bayer AG, which in 2018 announced plans to leave the animal space and refocus on consumer health and crop science.
The combination of Elanco and Bayer Animal Health would form a company with annual revenue close to $5 billion, nearly $1 billion less than industry leader Zoetis Inc. Together, Elanco and Bayer would have more than 225 brands in the companion and food animal markets, 21 manufacturing sites and 10,000 employees.
Indiana-based Elanco did not report any planned reductions in factories or workforce.
“Under the agreement with Elanco, all Bayer Animal Health employees will have at least one year of employment protection against unilateral termination,” said Bayer AG chairman Werner Baumann.
Elanco hopes to capitalize on emerging consumer trends, Simmons said.
“In the companion animal space, the growing decision-making power and autonomy of the pet owner is driving transformation,” he said. “Pet owners are becoming much more active in their pets’ care, driving remarkable growth of online and retail channels for pet medications.”
The millennial generation, Simmons said, is the largest demographic of pet owners, with 35% having a pet.
“We see this very strong trend of younger pet owners with increasing expectations of care spending more through diverse channels, truly establishing a new normal in the companion animal health industry,” he said.
Among Bayer’s pet products are over-the-counter Seresto flea and tick collars, Advantage flea control and the prescription ear infection drug Claro.
On the food animal side, Elanco’s portfolio would add brands such as the antimicrobial Baytril for cattle and swine.