Elanco Animal Health will spend $7.6 billion to acquire Bayer AG’s veterinary medicines business, which would make it the second-largest animal health company.
Elanco said Tuesday that it will pay $5.3 billion, or about 70% of the total price, in cash and the rest in stock. The deal would mean that half of Elanco’s overall business would be in the lucrative pet products market. The other half would be generated by livestock related sales.
Company shares fell nearly 4% in early morning trading.
Elanco was spun off from the Indianapolis drugmaker Eli Lilly and Co. The company makes antibiotics and feed additives for livestock and flea and heartworm treatments for pets.
The acquisition will expand Elanco e-commerce sales for pets, a hot corner of the market. This summer, the online pet food company Chewy went public and shares soared about 60% on the first day, driving its market value to $14 billion. Its shares have moderated somewhat since.
Germany’s Bayer is divesting several of its businesses to lower debt after spending $63 billion last year to acquire Monsanto. It also faces thousands of lawsuits claiming that the Roundup weed killer made by its new subsidiary causes cancer. Bayer says studies have established that Roundup’s active ingredient is safe.
The companies expect the deal to close by the middle of next year, subject to approval by antitrust authorities.
Elanco, headquartered in Greenfield, Indiana, has 5,800 employees and is active in more than 90 countries.
Company shares slipped $1.12 to $28.65 in premarket trading Tuesday. The stock had already fallen more than 5% so far this year.