Elanco Animal Health Incorporated has closed the acquisition of Bayer Animal Health. The transaction is valued at $6.89 billion.

“This milestone is another key step in Elanco’s journey," said Jeff Simmons, president and CEO of Elanco. "But, ultimately, today is about improving the lives of animals, people and improving the health of the planet. Pets and protein have never been more important,” Simmons said. “Food supply disruptions and increasing unemployment are driving food security challenges around the world. At the same time, research shows increased time at home has changed the long-term relationship between pets and their owners, as pets increasingly provide valuable emotional support. We know making life better for animals simply makes life better.”

Meanwhile, the pandemic has accelerated key trends transforming the industry, particularly pet owners’ desire to access veterinary care and animal health products in a variety of forms, from curbside care and telemedicine to online purchases shipped direct to the doorstep. The combination of Elanco and Bayer Animal Health joins Elanco’s existing strong relationship with the veterinarian with Bayer Animal Health’s focus in retail and online in order to create an omni-channel leader best positioned to serve veterinarians and pet owners where they want to shop.

Related:FTC grants approval for Elanco acquisition

This acquisition strengthens Elanco’s Innovation, Portfolio, Productivity (IPP) strategy, which the company has been executing on since before its IPO in 2018. Elanco’s R&D pipeline is now bolstered with five expected launch equivalents from Bayer – bringing Elanco’s anticipated total to 25 by 2024 – with five of those expected to launch by the end of 2021. The transaction also adds new R&D capabilities, including innovative dosing and delivery technology platforms, and provides access rights to Bayer’s Crop Science R&D pipeline and de-prioritized clinical pharma assets.

Financing terms

Upon close, Bayer AG received $5.17 billion in cash, comprised of proceeds from the company’s equity and tangible equity unit issuances in the first quarter of 2020 and debt financing from the Term Loan B priced in the first quarter of 2020 that closed with the transaction closing. Additionally, approximately 72.9 million shares of Elanco Animal Health common stock were issued to Bayer AG. These shares will be subject to a lock up, where Bayer cannot sell any shares for the first 90 days. In the second 90 days, 50% of shares are eligible for sale and the remainder may be sold after 180 days. Moreover, Elanco has completed the required anti-trust divestures that had been previously announced.  The divested products had 2019 revenue in the range of $120 million to $140 million.

Related:EC approves Elanco's purchase of Bayer animal health business

Goldman Sachs acted as financial advisor to Elanco and Paul, Weiss, Rifkind, Wharton & Garrison LLP, Hengeler Mueller and Slaughter and May acted as legal counsel to Elanco.

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