Bayer, Elanco get FTC's final antitrust go-ahead for $7.6B animal health merger after divestitures

Bayer can soon cross off another item on its restructuring to-do list.

On Wednesday, Elanco said its planned $7.6 billion acquisition of Bayer’s animal health division had won final antitrust clearance from the U.S. Federal Trade Commission.

That means the transaction is slated to be closed at the beginning of August, Elanco said.

For the Eli Lilly spinoff, the deal complements the company’s strength on the veterinarian side with Bayer’s direct-to-consumer expertise through the marketing of popular pet health products such as Advantage, Advantix and Seresto.

As for Bayer, shedding the animal health franchise rounds out an overhaul plan unveiled in late 2018. It allows the German conglomerate to focus on its pharmaceutical and agricultural chemicals businesses, with more resources being relocated to drug R&D.

But the transaction has hit some regulatory roadblocks. The FTC has been reviewing the deal for months after it sent Elanco a second request for more information. In a complaint filed on Tuesday, the agency raised antitrust concerns over the combination of drugs in three areas.

To win the FTC green light, Elanco agreed to divest worldwide rights for Osurnia, a treatment for ear inflammation in dogs and a rival to Bayer’s Claro; U.S. rights for Capstar, which, as Bayer’s Advantus, is one of the two only fast-acting oral treatments that kill fleas in dogs and cats; and U.S. rights for StandGuard, a pour-on insecticide for cattle.

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Blessing from the FTC marks the last antitrust hurdle for Elanco and Bayer; the European Commission, as well as regulators in Australia, Brazil, Canada, China, among others, have all given their go-aheads.

After the deal closes, Bayer will own some Elanco stock as part of the payment. The German company has said it intends to exit its stake in Elanco over time.

Prior to animal health, Bayer sold off its Coppertone sunscreen brand and Dr. Scholl’s foot care line, and divested its stake in Germany-based site services provider Currenta.

Meanwhile, the company is close to a settlement for Roundup litigations—or at least part of it. It’s now reworking with the plaintiffs on a $1.25 billion part of the deal concerning potential future claims after the presiding judge said he would reject it. Even though the section, in which up to $9.6 billion would be allocated to resolve existing claims, appears unaffected, Bayer said it still aims for a resolution that simultaneously addresses both the current and future litigation.