FTC Move Delays Bayer-Elanco Deal

12.12.2019 -

Bayer’s planned sale of its animal health business to Eli Lilly’s veterinary spinoff Elanco in a $7.6 billion cash and stock deal, sealed in August this year, now faces a delay.

Elanco has reported that it has received a Second Request for information from US anti-trust authority Federal Trade Commission (FTC). This means that the regulatory body has competition concerns that it wants to explore in more depth.

The process is akin to the European Commission’s in-depth review, which in the past has caused delays to a number of large mergers and acquisitions, including the Bayer-Monsanto deal.

Despite the additional scrutiny, Elanco stressed that it had anticipated the request under the US Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR). It added that the review continues to progress as expected and that it still expects to complete the acquisition in mid-2020 as originally planned.

“We continue to work collaboratively with the FTC and other regulators around the world and are progressing as expected,” said Jeff Simmons, president and CEO of Elanco. “We remain confident in our expectations that any related dispositions will be consistent with the underlying pro-forma financials referenced in our August acquisition announcement.”

The Second Request extends the waiting period imposed by the HSR Act until 30 days after the parties have substantially complied with the request, though it can also be extended voluntarily by the parties or terminated sooner by the FTC.

A merger of Elanco and Bayer Animal Health would create the world market’s second largest player, with a share of 13%, behind Zoetis and ahead of unlisted Boehringer Ingelheim and Merck & Co.’s related businesses.

Bayer’s rationale in selling the business is to pay down debt from the Monsanto acquisition and free up funds to spend on healthcare.

Elanco plans to finance the cash payment with a combination of new debt and equity. As the company is already carrying a large debt burden following its separation from Lilly, Bayer will be obliged to retain its equity stake in the divested business for an undetermined period.