Antitrust Law Daily FTC clears Elanco’s acquisition of Bayer Animal Health subject to divestitures
Wednesday, July 15, 2020

FTC clears Elanco’s acquisition of Bayer Animal Health subject to divestitures

By Jeffrey May, J.D.

Agency settlement outlines final antitrust conditions needed to complete the combination of the global suppliers of animal health products.

In order to proceed with its proposed $7.6 billion acquisition of Bayer Animal Health GmbH, Elanco Animal Health, Inc. will be required to divest three animal health products to settle FTC competition concerns, the agency announced today. The FTC alleges that the proposed acquisition threatens competition in three U.S. markets in which the companies compete: low-dose prescription treatments for canine otitis externa; fast-acting oral treatments that kill adult fleas on canines; and brand name cattle pour-on insecticides. Under the terms of a proposed FTC consent order, Elanco would be required to divest its canine otitis externa treatment product (Osurnia); its fast-acting oral treatment that kills adult fleas on canines (Capstar); and its brand name cattle pour-on product (StandGuard) (In the Matter of Elanco Animal Health, Inc., FTC Dkt. C-4725, File No. 191 0198).

The proposed consent order would require Elanco to divest Osurnia to United Kingdom-based Dechra Pharmaceuticals PLC; Capstar to PetIQ, Inc. of Boise, Idaho; and StandGuard to Neogen Corp. of Lansing, Michigan. Each of the divestitures requires Elanco to transfer all supply input and other manufacturing contracts, business information, product approvals (including relevant Food and Drug Administration marketing authorizations), intellectual property, and other related assets to the relevant divestiture buyer. The settlement also contains provisions to ensure that the divestitures are successful and timely, according to the agency.

Final antitrust hurdle. Elanco issued a statement on July 15 that the FTC decision represented the final antitrust clearance needed to complete the transaction, which was on track for closing at the beginning of August. "This approval marks the near-final step in fulfilling our vision of bringing together two dedicated animal health companies focused on delivering innovation and an expanded portfolio of solutions to farmers, veterinarians and pet owners around the globe," said Jeff Simmons, president and CEO of Elanco.

Elanco reports that it has received antitrust clearance for the transaction from the European Commission (EC), as well as Australia, Brazil, Canada, China, Colombia, New Zealand, South Africa, Turkey, Ukraine, and Vietnam.

Clearance from Canada came just one day earlier. The Canada Competition Bureau announced on July 14 that Elanco entered into a consent agreement to address that agency’s concerns related to the proposed acquisition. The consent agreement requires Elanco to divest its canine otitis product and Bayer’s feline dewormer. Elanco has also committed to forego acquiring Bayer AG’s Canadian distribution rights to several poultry insecticides. Rather, Bayer’s CropScience division will retain these distribution rights. The consent agreement also prevents Elanco, without the Bureau’s approval, from acquiring Bayer’s retained poultry insecticides with darkling beetle coverage for a period of 10 years and from acquiring a significant interest in any poultry insecticides with darkling beetle coverage for a period of two years without providing advance notice to the Bureau and waiting a prescribed period of time to complete the acquisition. Dechra has been approved as acceptable buyers of Elanco’s canine otitis product.

Attorneys: Joseph Lipinsky for the FTC. Charles F. Rule (Paul, Weiss, Rifkind, Wharton & Garrison LLP) for Elanco Animal Health Inc. Thomas A. McGrath (Linklaters LLP) for Bayer AG.

Companies: Elanco Animal Health Inc.; Bayer Animal Health; Bayer AG; Dechra Limited; Dechra Veterinary Products LLC; PetIQ, Inc.; Neogen Corp.

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