by Aaron Kirchfeld, Eyk Henning, Ruth David and Manuel Baigorri

Bayer AG is considering a sale of its animal-health business as it scrutinizes its portfolio in the aftermath of the $63 billion Monsanto Co. acquisition, people familiar with the company’s plans said. 

Bayer is evaluating animal health as part of a broader review, though a sale isn’t imminent, said the people, who asked not to be named because the appraisal hasn’t been made public. No final decisions have been made, and it’s still possible the German company could decide to keep the business. 

Investors will be looking for an update on Bayer’s strategy when they meet the company for its Dec. 5 capital markets day in London. An animal-health sale would be one way for Chief Executive Officer Werner Baumann to raise cash as he works to secure growth for the health-care half of the company, which is facing a patent expiration on its top-selling heart drug Xarelto in the coming years. 

Bayer could gain 6 billion euros to 7 billion euros ($6.9 billion to $8.1 billion) if it sells animal health, enough to make the pharmaceutical division “nimble again,” Sanford C. Bernstein analysts said in a note this month.

If Bayer decides to divest animal health, a sale is the likeliest option though it could also list the business, one of the people said. Eli Lilly & Co. listed its Elanco Animal Health Inc. unit in a $1.7 billion initial public offering in the U.S. last month. 

A spokesman for Bayer declined to comment. 

Bayer shares rose 4% to 78.01 euros in Frankfurt trading at 11:04 a.m. The shares have declined 24% this year.

Declining Importance

Animal health has long been a conundrum for the conglomerate. It’s the industry’s fifth-biggest player, making up about 5% of the global market and trailing rivals including Zoetis Inc. and Boehringer Ingelheim GmbH, according to Markus Mayer, an analyst at Baader Bank AG. Yet sales have grown, reaching about 1.6 billion euros in 2017 and making it an attractive target.

“We see a high probability Bayer will divest animal health,” Mayer said in a Sept. 24 note. “Particularly as its relative importance has decreased due to the Monsanto acquisition.” 

Last year, people familiar with the matter said some of the unit’s employees had been offered buyouts as part of a reorganization. Animal health employed about 3,500 people at the end of 2017, an 11% decrease from the previous year. More than half of the production is based in the northern German city of Kiel.

--With assistance from Tim Loh and Naomi Kresge.

To contact the reporters on this story: Aaron Kirchfeld in London at [email protected] ;Eyk Henning in Frankfurt at [email protected] ;Ruth David in London at [email protected] ;Manuel Baigorri in Hong Kong at [email protected]

To contact the editors responsible for this story: Eric Pfanner at [email protected] Amy Thomson, John Lauerman

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