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Bayer deal could leapfrog Elanco to become industry leader

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Elanco Animal Health said on Tuesday it would buy Bayer’s veterinary drugs unit in a deal worth $7.6 billion, creating the second-largest animal health business sector.

The acquisition of Bayer’s animal health unit is subjected to regulatory approval. As a part of the deal, Bayer will receive $5.32 billion in cash, subject to customary purchase price adjustments, and $2.28 billion made up of Elanco Animal Health common shares. The Bayer deal would push Elanco’s gross debt to roughly five times adjust EBITDA after taking into account cost cuts it plans to make through the acquisition of Bayer’s animal health unit.

Bayer deal Elanco industry leader

The Bayer Cross, one of the best-known trademarks in the world, is given a good clean at Cologne-Bonn airport. Photo: Bayer AG

The deal is expected to close by mid-2020, Elanco said.

Company statements on the Elanco - Bayer Merger

Elanco said in a statement the combined organization will “continue to deliver mid-single-digit revenue growth while accelerating the achievement of adjusted gross margin goals and delivering double-digit adjusted EBITDA margin growth.”

Jeffrey N. Simmons, Elanco president and chief executive, said: “The move combines our long-standing focus on the veterinarian while meeting pet owners' changing expectation of pet care and access to products.”

“The combination with Elanco will give rise to a leading competitor in the animal health industry, benefiting customers, employees and shareholders alike,” said Bayer chief executive Werner Baumann.

The division sells veterinary treatments for both pets and livestock, including the best-selling Advantage treatment for fleas and ticks.

Surpass Zoetis as Industry Leader

Now that the Bayer deal has materialized, more than 40 percent of the combined company’s sales would come from animal health products, a similar proportion to market leader Zoetis.

Bayer Deal Elanco industry leader

The Bayer deal is crucial in Elanco’s effort to become an industry leader in the animal-healthcare sector.

Today’s news should please investors since pet-health has become a hotbed for investment for the past few years. According to a report by Global Market Insights, Inc., global animal-health market is expected to peak $36 billion by 2024. Burgeoning pet adoption across the world, especially in developing countries, is driving the surge in pet-health market growth. With increasing disposable incomes, pet owners would be able to spend more on animal healthcare. Wonder who's profiting from the trend in pet humanization? Here's a more detailed post on top companies in animal health.

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