Bayer may hive off another unit as it doubles down on pharma, consumer health

Bayer CEO Marijn Dekkers

Turns out it may not be just Bayer's plastics business that's on its way out the door. The company is reportedly exploring a sale of its diabetes device business as it rides pharma's slim-down wave.

The German company is working with Credit Suisse on the potential sale, Bloomberg's sources say, and takers for the unit--which could command between €1 billion and €2 billion ($2.5 billion)--could include private equity firms like Cinven, EQT Partners, KKR and Triton Advisers.

Selling off the business, which makes products including the blood-glucose meter Contour, is part of a larger plan to double down on core areas. Namely, that's Bayer's pharma unit--tearing it up on the back of growth drivers Xarelto and Eylea, to name a couple--as well as its fast-growing consumer health business. CEO Marijn Dekkers has said that Bayer's eyeing the top spot in the global OTC market, and a $14.2 billion pickup of Merck's ($MRK) consumer unit this May helped keep it on that path.

But with a host of other contenders eyeing the consumer crown, Bayer will have to keep snapping up companies, and recently Dekkers said it would use funds raised from a forthcoming plastics business IPO to do just that. "We believe that critical mass is important," he told the Financial Times. "You need to be a large player there."

Aside from pharma and consumer health, animal health seems to be on Bayer's priority list, too. Pfizer ($PFE) spinoff Zoetis ($ZTS) is on the company's radar, Bloomberg reports, and the news service's sources say it may make a bid for the $22 billion industry leader once the plastics unit and diabetes sale generate some funds.

"Buying Zoetis would give Bayer an instant leadership position, and it seems like they've expressed wanting to be leaders in the spaces they compete in," Gabelli & Co. analyst Kevin Kedra told the news service in September. "It would give them a business that has stable cash flow, steady growth and a relatively predictable business in an area that they know pretty well."

But while Bayer might be in no rush to make a play for Zoetis, competitors may already have one in the works. Activist investor Bill Ackman, who recently teamed with Valeant ($VRX) on a failed bid for Allergan ($AGN), earlier this month nabbed an 8.5% stake in the animal health business. Analysts say Ackman could use that stake to pressure Zoetis into a sale--perhaps to Valeant, whose CEO has expressed an interest in breaking into the space.

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Special Reports: The top 10 pharma companies by 2013 revenue - Bayer HealthCare | Pharma's top 10 M&A deals of H1 2014 - Bayer/Merck Consumer Health | Top 10 animal health companies of 2013 - Bayer - Zoetis

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