Antitrust Law Daily EC conditionally approves Elanco's acquisition of Bayer's animal health division
Monday, June 8, 2020

EC conditionally approves Elanco's acquisition of Bayer's animal health division

By Jeffrey May, J.D.

U.S.-based animal health company agrees to a proposed divestiture package to resolve EC competition concerns. Additional approvals, including FTC sign-off, still needed to complete deal.

Elanco Animal Health Inc. has received European Commission (EC) approval for its proposed acquisition of Bayer AG’s animal health division (BAH) subject to divestitures of otitis treatment products and several types of parasiticides. Although the EC found that no competition concerns arose for the majority of the products supplied by the companies, there were markets in which both firms have strong positions and/or face a limited number of competitors. To address competition concerns in those markets, the EC will require divestiture of Elanco or BAH’s products and/or pipelines in relation to otitis and anticoccidials at the global level and parasiticides for pets in Europe and the United Kingdom.

Without the divestitures, "the acquisition by Elanco of Bayer's Animal Health division would have significantly reduced the current and future choice of competing and innovative drugs available to vets, pet owners and farmers for certain animal disease," EC Executive Vice-President Margrethe Vestager said. "With the divestment of current and pipeline products treating ear infections and parasites in pets and livestock, the merger can go ahead whilst preserving competition and innovation in these markets."

According to a statement issued by Elanco, the proposed commitments include: divestiture of the worldwide rights for Osurnia—a treatment for otitis externa in dogs—to Dechra Pharmaceuticals PLC; divestiture of the worldwide rights for Vecoxan, used for prevention and treatment of coccidiosis in calves and lambs, to Merck Animal Health; and divestiture of European Economic Area and U.K. rights to the Drontal and Profender product families and related pipeline assets (broad-spectrum de-wormers for dogs and cats) from BAH to Vetoquinol SA.

Other divestiture plans. Elanco has offered a series of commitments to win clearance in other jurisdictions. Last month, the Australian Competition and Consumer Commission (ACCC) announced that it was seeking views on a divestiture package linked to the proposal. The package would require Elanco to "sell the Drontal, Profender and Droncit worming brands, and the Avenge+Fly sheep lice brand to a purchaser or purchasers approved by the ACCC."

In January, Elanco announced that it signed an agreement to divest the U.S. rights to Capstar—an oral tablet that kills fleas in dogs and cats—to PetIQ, Inc., a leading pet medication and wellness company, for $95 million, apparently in an effort to resolve FTC competition concerns. The company said that closing of the transaction with PetIQ was contingent on Elanco entering into a settlement with the FTC in connection with its Bayer transaction. At that time, Elanco said that it was in advanced discussions with both the FTC over the transaction. The company received a second request from the agency in December 2019.

Elanco expects to close the deal in August. In addition to EC approval, the company has received antitrust clearance for the transaction in China, Colombia, South Africa, Turkey, Ukraine, Vietnam, and provisional clearance in Brazil. Elanco continues to cooperate with agencies in other jurisdictions, it was noted.

Elanco announced its agreement with Bay to acquire BAH in August 2019 in a transaction then valued at $7.6 billion. If the parties can close the deal, the transaction would "create the second largest animal health leader."

Companies: Bayer AG; Elanco Animal Health Inc.; Dechra Pharmaceuticals PLC; Merck Animal Health; Vetoquinol SA; PetIQ, Inc.

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