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Chick-News.com Poultry Industry News, Comments and more by Simon M. Shane

Bayer to Auction Animal Health Business

04/30/2019

It is the intention of Bayer AG to divest their Animal Health business that generated revenues of $1.7 billion in 2018. Since the 2018 acquisition of Monsanto for $63 billion, CEO Werner Baumann has been under pressure to reduce debt and restructure the Company with a focus on pharmaceuticals that carry higher margins and less competition than animal health and consumer products. Bayer is facing substantial legal exposure as a result of glyphosate litigation.

The company is also actively negotiating with potential acquirers of their Coppertone and Dr. Scholl’s brands. Bayer AG has announced that it will reduce complement by 12,000 employees including 900 in R&D, 4,000 in crop science, and 6,000 in the corporate office over the intermediate future.

In 2017, Bayer AG turned down a proposal to purchase Elanco Animal Health from Eli Lilly. Subsequently the parent company failed to find an alternative buyer for the business and restructured the company as a free-standing entity with an IPO.

Potential acquirers of the animal health business include investment companies such as KKR, Blackstone and CVC Capital Partners. As yet, no existing competitor has come forward with an offer for the Animal Health business which has a narrow focus on anti-parasitics with a concentration on companion animal species with the HeartGuard™ flea and tick collar as the principal product. Bayer Animal Health employs 550 in Shawnee, in metropolitan Kansas City.

If Bayer Animal Health is acquired by an investment group, it is predicted that expenditure on R&D will be severely curtailed to maximize short-term profits. Other “rationalization” and possible divestments will erode the image and existing technical service offered by the company.  Given competition from established biopharmaceutical companies including Boehringer Ingelheim that markets biologics and anti-parasitics, it is questioned whether the Bayer Animal Health business is worth the $9 billion mentioned as a whisper number. In 2018 sales in the E.U., the U.S. and the Middle East were flat compared to 2017, although there are prospects for increased market penetration in China.


 
Copyright 2019 Simon M. Shane