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Bayer Weighs Selling Its Vet Unit in Post-Monsanto Revamp

(Bloomberg) -- Bayer AG is considering a sale of its animal-health business as it scrutinizes its portfolio in the aftermath of the $63 billion Monsanto Co. acquisition, people familiar with the company’s plans said.

Bayer is evaluating animal health as part of a broader review, though a sale isn’t imminent, said the people, who asked not to be named because the appraisal hasn’t been made public. No final decisions have been made, and it’s still possible the German company could decide to keep the business.

Bayer’s management is under pressure from large shareholders to sell assets, including the animal-health business, to help revive its share price, two people familiar with the matter said. Investors will be looking for an update on Bayer’s strategy when they meet the company for its Dec. 5 capital markets day in London.

The stock has declined 23 percent this year, hit by a court verdict that blamed Monsanto’s Roundup weedkiller for a user’s cancer diagnosis. The company won a tentative ruling that slashed the $289 million damages against Monsanto this week, with a judge saying she’s considering a new trial.

An animal-health sale would be one way for Chief Executive Officer Werner Baumann to raise cash as he works to secure growth for the health-care half of the company, which is facing a patent expiration on its top-selling heart drug Xarelto in the coming years.

A spokesman for Bayer declined to comment.

‘Nimble Again’

Bayer could gain 6 billion euros to 7 billion euros ($6.9 billion to $8.1 billion) if it sells animal health, enough to make the pharmaceutical division “nimble again,” Sanford C. Bernstein analysts said in a note this month.

If Bayer decides to divest animal health, a sale is the likeliest option though it could also list the business, one of the people said. Eli Lilly & Co. listed its Elanco Animal Health Inc. unit in a $1.7 billion initial public offering in the U.S. last month.

Bayer shares rose 4.3 percent to 78.25 euros in Frankfurt trading at 3:00 p.m.

Declining Importance

Animal health has long been a conundrum for the conglomerate. It’s the industry’s fifth-biggest player, making up about 5 percent of the global market and trailing rivals including Zoetis Inc. and Boehringer Ingelheim GmbH, according to Markus Mayer, an analyst at Baader Bank AG. Yet sales have grown, reaching about 1.6 billion euros in 2017 and making it an attractive target.

“We see a high probability Bayer will divest animal health,” Mayer said in a Sept. 24 note. “Particularly as its relative importance has decreased due to the Monsanto acquisition.”

Last year, people familiar with the matter said some of the unit’s employees had been offered buyouts as part of a reorganization. Animal health employed about 3,500 people at the end of 2017, an 11 percent decrease from the previous year. More than half of the production is based in the northern German city of Kiel.

 

©2018 Bloomberg L.P.

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