|Bayer CEO Marijn Dekkers|
Bayer CEO Marijn Dekkers isn't so thrilled with his company's number-5 ranking in animal health. But his company has repeatedly missed out on opportunities to expand its veterinary offerings, losing a bid for Schering-Plough's animal health division, passing on the opportunity to buy Pfizer's ($PFE) Zoetis ($ZTS) unit before it was spun off, and getting beat by Eli Lilly ($LLY) for the chance to buy Novartis ($NVS) Animal Health.
But now Bayer may be looking at a potential cash infusion, as it prepares to divest its MaterialScience unit and likely take it public by mid-2016. Bayer just might use that cash to make an acquisition in animal health, Dekkers tells Bloomberg.
"We've always looked at different animal-health opportunities that have come and gone," Dekkers said. "It's a very attractive business for us," and "we've always looked with interest in it. It hasn't happened with us yet."
Analysts have long speculated that Bayer would make a bid for Zoetis, which has been under pressure of late from activist hedge fund investor Bill Ackman of Pershing Square Capital. Such a match-up wouldn't be out of the question, Bloomberg points out: Bayer's shares have traded up 27% since last September, and the company is now valued at €110 billion ($121 billion). Zoetis' market cap is $24.6 billion.
Zoetis, for its part, has been doing everything it can to fend off a takeover since Ackman started buying up the company's shares and applying pressure last year. In early May, after trimming its sales estimates for 2015, Zoetis announced a sweeping cost-cutting plan that it expects will boost its operating profit margin from 25% to 34% by 2017. It's also eliminating 5,000 SKUs and selling or exiting 10 manufacturing plants.
As for Bayer, picking up an animal-health asset would likely enhance the company's ongoing efforts to refine its presence in the industry. In April, Bayer closed an animal-health production facility in St. Joseph, MO that it had acquired as part of its $145 million purchase of Teva's ($TEVA) animal health unit in 2012. Bayer initially tried to sell the site but ended up closing it due to excess capacity.
Still, Bayer has also been investing in animal health, developing new products for both the companion and food sides of the industry. Last December, for example, the company launched a new smartphone app to help dairy farmers monitor herd health.
- here's the Bloomberg story
- get FiercePharma's take
Special Reports: Top 10 animal health companies of 2013 - Bayer Animal Health - Zoetis | Pharma's top 10 M&A deals of 2014 - Bayer/Merck Consumer Health - Eli Lilly/Novartis Animal Health