Elanco Animal Health Incorporated has closed the acquisition of Bayer Animal Health. The transaction, valued at $6.89 billion, brings over 166 years of legacy between the two companies, said Jeff Simmons, president and CEO of Elanco, during a press conference on Monday.
“Ultimately, today is not about us. It's about farmers, veterinarians, pet owners, protein consumers. We believe without question what these two companies can do with over 166 years of legacy between us is to create significant value with a great portfolio that has expanded more services, a lot more innovation and the ability to impact society’s need for more high quality, nutritious protein in the center of the dinner table, and paths that are at the center of the family are never more significant than they are today,” Simmons said.
Historic Times: ASF and COVID-19
Food supply disruptions and unemployment continue to increase due to COVID-19, creating food security challenges around the world. At the same time, Simmons said research shows the increased time at home has changed the long-term relationship between pets and their owners, as pets increasingly provide valuable emotional support.
“Nearly two years into our journey as an independent company, we have made significant progress in creating a purpose-driven, independent global company dedicated to animal health – all while weathering the century’s most significant animal and human health pandemics: African Swine Fever and COVID-19,” Simmons said. “Delivering on the timely close of the acquisition and bringing momentum into Day 1 in this challenging environment underscores the deep capability and disciplined execution from both companies.”
The pandemic has pushed key trends forward that are 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,” the company said in a release.
The combined company is expected to generate significant operating cash flow as a result of the durable industry and resilient portfolios, the company said. Despite the challenges caused by COVID-19, Elanco expects to deliver $275 to $300 million in synergies by 2025.
A Robust Pipeline
The company plans to launch 25 new products between now and 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, the company said in a release.
“We're going to be able to bring global breath, size, scale, pipeline and capabilities to bring a constant flow of innovation in a much better way than the two companies could independently,” Simmons said.
Innovation is the number one thing customers expect, Simmons said. “Give consumers what they want, pet owners what they want, give animals what they need, and allow the farmer and the veterinarian to be able to utilize that,” he added.
A 50/50 Approach to Animal and Pet Health
The combination expands Elanco’s portfolio to provide farmers, pet owners and veterinarians more comprehensive animal health solutions. By combining Elanco’s longstanding focus on the veterinarian with Bayer’s direct-to-consumer experience, the transaction opens new opportunities for growth, the company said.
“As you bring Bayer and Elanco together, we're now going to be 50/50 when you look at livestock and pets. More diversity and more durability – that's going to fuel a lot of opportunity,” Simmons said.
Elanco’s pet business will become approximately 50% of revenues and nearly triples the company’s international pet health business. The transaction also adds a number of anchor cattle brands, enhances the company’s global bio-protection portfolio, and expands the company’s aqua presence into warm water fish.
“There’s a demand for protein globally, and it’s significant. We need to not lose 20% to mortality and morbidity of animals and that’s where Elanco comes into play,” Simmons said. “These two companies are going to bring together a stronger, more global pork business. We're going to bring one of the broadest cattle portfolios that exists, bringing Bayer into Elanco.”
If COVID-19 has made anything clear, Simmons believes it’s that the world has never needed animals and the work farmers and veterinarians do more.
“We're excited about the opportunity to create a company that will make the lives of animals better, ultimately making life better,” he said.
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