Bayer, one of the largest pharmaceutical companies in the world, has long been involved in life science in addition to its lifelong pharmaceutical interests. Despite focusing a great deal of attention in life sciences, Bayer recently announced that it would be parting ways with its animal health operations to Elanco, a global leader in the world of animal health.
Even though Bayer’s animal health operations are profitable and doing well for themselves, the company has found itself in dire need of a major reorganization after gobbling up Monsanto last year. Monsanto is currently responsible for paying out many billions of dollars to people who have developed cancer as the direct result of being exposed to Roundup, Monsanto’s flagship offering, an herbicide with the chemical name of glyphosate. Bayer arranged to purchase Monsanto before it became responsible for paying so many settlements out and has been forced to stick to its guns and pay Monsanto’s mounting liabilities.
Elanco is slated to acquire Bayer’s animal health operations for $7.6 billion, which will make Elanco the second-largest business in the global animal health industry in terms of revenue.
Right now, Elanco is the fourth-largest animal health sector competitor when it comes to revenue, lagging behind Merck, Boehringer Ingelheim, and Zoetis, respectively. However, after the acquisition of Bayer’s operations takes place, Elanco will skip past Merck and Boehringer Ingelheim, effectively putting them down to the ranks of the third- and fourth-largest such companies in the world.
Precisely 70 percent of the $7.6 billion value will be paid to Bayer in cash, with the remaining 30 percent, or $2.28 billion, slated to be paid to Bayer in public shares of Elanco. After the deal takes place, Elanco’s gross debt will be roughly five times larger than its EBITDA, or earnings before interest, tax, depreciation, and amortization.
Bayer has sold off other parts of its holdings that were once highly valued and essential to its operations since taking on the nightmare that is Monsanto. For example, just three months ago, in May, Bayer sold off its Coppertone line of products for $550 million. Just last month, in July, the company got rid of Dr. Scholl’s, a foot care line, for $585 million.
In order to save money, Bayer has also got rid of 12,000 positions among its ranks.
The most popular product that Bayer has under its animal health umbrella is Advantage, a treatment used to prevent tick and flea infestations. Bayer sells products for both commercial agricultural use and consumer use.