Indiana Ag Connection - Elanco Signs Agreement with PetIQ to Divest Capstar

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Elanco Signs Agreement with PetIQ to Divest Capstar
Indiana Ag Connection - 01/15/2020

Elanco Animal Health Inc., Greenfield, Ind., announced 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 in an all-cash deal. The product had 2018 revenue of $28.5 million.

Divesting Capstar further advances Elanco's efforts to gain U.S. regulatory clearance for the previously announced acquisition of Bayer AG's global animal health business. The closing of the transaction with PetIQ is contingent on Elanco entering into a consent decree with the Federal Trade Commission (FTC) in connection with its Bayer transaction, as well as other customary closing conditions.

"We're pleased with the continued progress on a number of fronts to move the acquisition of Bayer's animal health business toward completion," said Jeff Simmons, president and CEO of Elanco. "PetIQ's vast distribution network and retail presence make it a natural choice to take Capstar into the future. As a current distributor for Capstar, PetIQ is well prepared to take over this product and ensure pet owners have continued access to this fast-acting flea control product."

This is the second divestiture announcement Elanco has made in the last week as it works to bring its acquisition of Bayer's animal health business to a close. Elanco previously announced an agreement to divest Osurnia, a treatment for otitis externa in dogs, to Dechra Pharmaceuticals, PLC. The company has stated it anticipates divesting a small portfolio of products across both organizations with total 2018 revenue of approximately $120 million to $140 million to achieve any required clearances globally. Osurnia and Capstar account for approximately half of that revenue. Elanco is in advanced discussions with both the FTC and EU Commission in regards to the remaining assets in those jurisdictions.

Discussions with other regulatory authorities are progressing as expected. Elanco already received antitrust clearance for the transaction from the Chinese competition authority. Any proposed remedy and final clearance for the Elanco/Bayer transaction remain subject to review and approval from the other regulatory authorities.

Goldman Sachs acted as financial advisor to Elanco. Covington & Burling LLP and Paul, Weiss, Rifkind, Wharton & Garrison LLP acted as legal counsel to Elanco.

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