- $5.4 billion deal creates
world's second-largest animal health company.
- Combination will increase Elanco's product portfolio, expand
its global commercial presence, and enhance manufacturing and
R&D capabilities.
- Combined organization is committed to leading the animal
health industry in delivering innovation and customer value.
- Lilly to host investor call at 10:15
a.m. EDT today.
INDIANAPOLIS, April 22, 2014 /PRNewswire/ -- Eli Lilly and
Company (NYSE: LLY) today announced an agreement to acquire
Novartis Animal Health for approximately $5.4 billion in an all-cash transaction that will
strengthen and diversify Lilly's own animal health business,
Elanco. Upon completion of the acquisition, Elanco will be the
second-largest animal health company in terms of global revenue,
will solidify its number two ranking in the U.S., and improve its
position in Europe and the rest of
the world.
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With a presence in approximately 40 countries and 2013 revenue
of approximately $1.1 billion,
Novartis Animal Health is focused on developing better ways to
prevent and treat diseases in pets, farm animals and farmed fish.
Lilly will acquire Novartis Animal Health's nine manufacturing
sites, six dedicated research and development facilities, a global
commercial infrastructure with a portfolio of approximately 600
products, a robust pipeline with more than 40 projects in
development, and an experienced team of more than 3,000
employees.
Deal Terms
Under the terms of the agreement, Lilly will acquire all assets
of Novartis Animal Health for a total purchase price of
approximately $5.4 billion, including
anticipated tax benefits. Lilly plans to fund this acquisition with
approximately $3.4 billion of
cash-on-hand and $2.0 billion in debt
to be issued. No other financial terms of the transaction are being
disclosed. The transaction is expected to close by the end of the
first quarter of 2015, subject to clearance under the
Hart-Scott-Rodino Antitrust Improvements Act, similar requirements
outside the U.S., and other customary closing conditions. The
transaction is not subject to any financing conditions.
Financial Expectations
By improving efficiencies and reducing costs across both Elanco
and Novartis Animal Health, Lilly expects to achieve estimated cost
savings of approximately $200 million
per year within three years of deal closing, equating to more than
10 percent of operating expenses from the combined animal health
businesses. Excluding the amortization of intangibles, Lilly
expects the combined entity to achieve EBIT as a percent of revenue
in the mid-20 percent range by 2018. The company expects the
transaction to be accretive to earnings on a cash basis beginning
in 2016, excluding integration costs. The timing of accretion on a
GAAP basis is dependent upon final purchase accounting. The
acquisition is not expected to change the company's dividend policy
or current share repurchase program.
John C. Lechleiter, Ph.D.,
Lilly's chairman, president and chief executive officer said that
the acquisition of Novartis Animal Health validates Lilly's
commitment to Elanco as a key component of Lilly's business going
forward.
"Animal health continues to represent an attractive growth
opportunity for Lilly. We intend to keep Elanco and to take
advantage of the substantial synergies between our animal health
and human health businesses," noted Lechleiter. "Significant
investments in our animal health business in recent years have
enabled Elanco to double its revenue since 2008, leading the
industry in growth. Global trends suggest continued sustained
demand for animal health products in the years ahead. Through this
acquisition, which moves Elanco to top-tier in the industry, we
intend to create value for our shareholders by adding to our
promising pipeline of innovative animal health assets, increasing
sales through a larger commercial footprint, and improving
efficiencies and lowering costs."
Benefits of the Transaction
The acquisition will greatly expand and complement Elanco's
product portfolio, R&D and manufacturing capabilities, and
commercial presence in key geographies. In particular, it provides
Elanco with a greater commercial presence in the companion animal
and swine markets, expands Elanco's presence in the equine and
vaccines areas, and creates an entry into the aquaculture
market.
"This deal creates a global animal health leader able to deliver
even more innovation and value to our customers," said Jeff Simmons, senior vice president of Eli Lilly
and Company and president of Elanco Animal Health. "Combining these
two great companies will enable us to provide more diversified
brands, reach more market segments, expand our global footprint,
and strengthen our pipeline, capabilities and expertise. Best of
all, it will enable Elanco to better fulfill our important mission
of enriching people's lives through safe, nutritious, affordable
food and healthier pets. And that directly supports Lilly's mission
to make life better for people around the world."
"Lilly emerged from our competitive process as the clear best
buyer for Novartis Animal Health and a good home for our
employees," said Joseph Jimenez, CEO
of Novartis. "We look forward to a smooth transition of the
business over the next several quarters."
Advisors
BofA Merrill Lynch is acting as financial advisor to Lilly and
Weil, Gotshal & Manges LLP is acting as legal counsel to Lilly.
Goldman Sachs is acting as financial advisor to Novartis and
Freshfields Bruckhaus Deringer is acting as Novartis' legal
counsel.
Conference Call and Webcast
Lilly will conduct a conference call with the investment
community and media today at 10:15 a.m.
EDT to discuss today's announcement. Investors, media and
the general public can access a live webcast of the conference call
through a link that will be posted on the investor section of
Lilly's website at www.lilly.com. The webcast of the conference
call will be available for replay via the website.
About Novartis Animal Health
The innovative, high-quality medicines of Novartis Animal Health
contribute to the quality of life, health and welfare of animals
around the world. For pets, their products are effective aids to
treat some internal and external parasites, prevent heartworm and
flea infestations and treat ailments such as arthritic pain and
kidney, heart and allergic diseases. For farm animals, they offer
therapeutic products to treat parasitic and bacterial diseases and
are also continually developing new vaccines to prevent diseases in
livestock and farmed fish. Specific needs of food producers in the
area of farm bioprotection are met by providing innovative fly
control products and services.
About Elanco
Elanco is a global, innovation-driven company that develops and
markets products and services to improve animal health and protein
production in more than 75 countries. Elanco employs more than
3,000 people worldwide, with offices in more than 40 countries, and
is a division of Eli Lilly and Company, a leading global
pharmaceutical corporation. Additional information about Elanco is
available at www.elanco.com.
About Eli Lilly and Company
Lilly is a global healthcare leader that unites caring with
discovery to make life better for people around the world. We were
founded more than a century ago by a man committed to creating
high-quality medicines that meet real needs, and today we remain
true to that mission in all our work. Across the globe, Lilly
employees work to discover and bring life-changing medicines to
those who need them, improve the understanding and management of
disease, and give back to communities through philanthropy and
volunteerism. To learn more about Lilly, please visit us at
www.lilly.com and http://newsroom.lilly.com/social-channels.
C-LLY
This press release contains forward-looking statements about
the benefits of the acquisition of Novartis Animal Health and the
potential of the combined businesses. This release reflects Lilly's
current beliefs, assuming that the transaction is successfully
closed; however, as with any such undertaking, there are
substantial risks and uncertainties in the process of implementing
the transaction and in the commercialization of these products. The
company cannot guarantee that the transaction will successfully
close, or that the company will achieve the expected benefits of
the transaction. There is no guarantee that the commercial assets
acquired will continue to be commercially successful, or that any
acquired pipeline assets will yield commercially successful
products. For further discussion of these and other risks and
uncertainties, please see Lilly's latest Forms 10-K and 10-Q filed
with the U.S. Securities and Exchange Commission. The company
undertakes no duty to update forward-looking statements.
Refer to: +1 (317) 276-5795 – Mark E. Taylor (Media - Lilly)
+1 (317) 276-4076 – Colleen Parr
Dekker (Media - Elanco)
+1 (317) 655-6874 – Philip Johnson
(Investors)