Pet peeve

20 August 2019 By Ed Cropley Follow @edwardcropley

Elanco is paying $7.4 billion in cash and shares to buy Bayer’s animal-health division. The deal may make more sense for the seller than the buyer. The Eli Lilly spinoff will have to ramp up sales and deliver on ambitious cost-cutting plans to make a success of its acquisition.

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Elanco Animal Health said on Aug. 20 it would pay $7.6 billion in cash and stock for Bayer’s animal-health business in a deal that would create the world’s second largest animal-health company.

Elanco will pay the German company $5.3 billion in cash and 68 million of its shares, worth $2.3 billion based on a share price of $33.60 per share, the volume-weighted average share price over the 30 days to Aug. 6.

Elanco said the stock amounted to 68 million shares, or a stake of about 18.2% based on Refinitiv data. The number of shares could rise or fall by as much as 7.5%, depending on Elanco’s share price performance on the closing date.

Elanco said the deal, which it expected to close by mid-2020, offered potential synergies of between $275 million and $300 million.

Bayer shares were flat on the day, at 66.35 euros. Elanco shares fell 6.1% to $27.99 by 1420 GMT on Aug. 20.

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