A week after Germany’s Bayer struck up a deal to develop new animal vaccines, questions about the company’s commitment to animal health have re-emerged. On May 19, Bayer confirmed it made an unsolicited takeover offer for seed-making giant Monsanto ($MON). It wasn’t long before analysts started speculating that Bayer would need to sell off its animal health unit to help finance the Monsanto deal.
No takeover price has been reported, according to Reuters, but Monsanto has a $42 billion market capitalization, and analysts estimate the sales price would be significantly higher than that. Monsanto said in a statement that its board is reviewing the proposal.
Analysts estimate that if Bayer puts its animal health business on the block, it could fetch as much as €7 billion ($7.8 billion). Bayer sells a range of products for both companion and food animals, including Advantix flea and tick fighter for dogs and Zelnate to treat bovine respiratory disease.
On May 10, Bayer formed a vaccine development partnership with BioNTech AG, a German company that uses a technology platform based on messenger RNA. The two intend to use the technology to develop vaccines for production and companion animals, they said.
Still, few would be surprised if Bayer’s new CEO, Werner Baumann, decided to cast off the animal health unit. In April, he admitted he was debating the future of that unit, particularly in light of Bayer’s inability to build it up to a competitive size. Under previous CEO Marijn Dekkers, the company lost out to Eli Lilly ($LLY) in a race to buy Novartis’ ($NVS) veterinary assets. It also failed to pick up animal health assets from Schering-Plough.
If the Bayer-Monsanto deal were consummated, agriculture would account for 55% of Bayer’s core earnings, up from 28%, according to Reuters. It would be Bayer’s largest deal to date. In animal health, on the other hand, company is falling behind: With $1.7 billion in sales of veterinary products in 2015, it was the fifth largest player in the industry. But it’s about to be eclipsed by Boehringer Ingelheim’s Vetmedica, which is merging with Sanofi’s ($SNY) Merial.