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Why Bayer Might Sell Its Animal Health Division


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German drugmaker Bayer AG will look into divesting its animal health unit if it continues to struggle to find takeover targets to bulk up the division, according to the company’s incoming CEO.

“We would really like to strengthen our animal health business. Animal Health is a business that we have been trying for many years to strengthen strategically, that is to say inorganically,” strategy chief Werner Baumann, who is to take over as CEO on May 1, said at a media briefing early this week.

“Should we not succeed at that in the end, we will have to ask the strategic question—as is the case with all our businesses—are these businesses well placed with us as best owner or can these businesses perhaps progress better in a different environment, with different access to resources.”

Revenue at the veterinary drugs unit, which was 1.49 billion euros ($1.71 billion) last year, will probably grow only “slightly” this year, Bayer said in February. Alongside medicines to repel flea and ticks and de-worm pets, the company has introduced Zelnate, a product that harnesses farm animals’ own immune system to fight an infectious disease without using antibiotics.

Baumann did not comment on how much longer Bayer would continue to scout for takeover targets. Bayer would consider partnerships and particularly joint ventures as long as it’s clear who owns the asset and sees no urgency to doing a deal.

“There is no immediate need to act, we can explore our strategic options calmly,” he said.

Other pharmaceutical companies with animal-health operations include Merck & Co. and Eli Lily & Co. Germany’s Boehringer Ingelheim GmbH announced plans in December to switch its over-the-counter drugs business for the animal-health division of France’s Sanofi. Zoetis Inc., spun off by drugmaker Pfizer Inc. in a 2013 initial public offering, ranks as the world’s largest producer of animal health products. Baumann estimated that Bayer’s unit ranks as No. 4 or 5 in the industry.

“We are not badly positioned,” he said. Should Bayer fail to bulk up the unit, it might consider a sale or a public offering, as it did last year for its plastics unit Covestro, Baumann said.

“We think the animal health area is highly attractive even if it is a relatively small industry,” he said. “There are possibilities to further strengthen the business and that is our goal.”

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