Elanco Animal Health Incorporated (NYSE:ELAN) entered into a share and asset purchase agreement to acquire Bayer Animal Health GmbH, KVP Pharma+Veterinär-Produkte GmbH and other animal health business in Germany and United States of America from Bayer Aktiengesellschaft (DB:BAYN) for $7.6 billion on August 19, 2019. CritiTech Inc. shall not be part of the deal. Elanco Animal Health Incorporated will pay approximately $5.3 billion in cash, subject to certain customary adjustments and issue shares worth $2.28 billion or approximately 68 million shares. Stock received by Bayer is subject to a 7.5% symmetrical collar centered on Elanco's volume-weighted average price for the 30 trading days ended August 6, 2019 of $33.60. This means that the number of shares of consideration shares is subject to a minimum share number of 92.5% and a maximum share number of 107.5% of the baseline share number of approximately $2.3 billion divided by an initial share price of $33.60, and is subject to adjustment for dividends declared on the its common stock. As part of the agreement, Bayer will acquire shares representing approximately 15.5% of Elanco's share capital. After the closing of the transaction, Bayer is subject to certain lock-up restrictions with respect to the transfer of the consideration shares, subject to certain specified exceptions. Under the purchase agreement, Elanco and Bayer have agreed to enter into certain other agreements in connection with the transaction, including with respect to intellectual property, research & development collaboration and supply of certain active ingredients.

On August 19, 2019, in connection with its entry into the purchase agreement, Elanco entered into a commitment letter with Goldman Sachs Bank USA and Goldman Sachs Lending Partners LLC, pursuant to which they committed to provide $3 billion of term loans, a $0.75 billion revolving credit facility and $2.75 billion of bridge loans in connection with the transaction, subject to the terms and conditions set forth in the commitment letter. As of January 21, 2021, Elanco Animal Health Incorporated announced public offerings of 19.2 million shares of its common stock and 11 million tangible equity units with an aggregate stated amount of $550 million for the units, Elanco Animal Health Incorporated intends to use the net proceeds from the offerings to finance a portion of acquisition of animal health business of Bayer AG. As of February 4, 2020, Elanco Animal announced it successfully priced its first lien senior secured credit facilities consisting of a term loan B facility in an aggregate principal amount of $4.3 billion and a revolving loan facility providing up to $750 million. The amount of the term loan B facility was upsized from the initial amount of $2.4 billion due to market demand. Elanco intends to use the proceeds from the term loans under the new credit facilities, together with the proceeds from the recently completed common stock and tangible equity unit offerings, to finance the cash portion of the previously announced acquisition of Bayer AG's animal health business and to pay related fees and expenses. The purchase agreement may be terminated prior to the consummation of the transaction by the mutual written consent of Elanco and Bayer and in certain other circumstances, including if closing has not occurred on or prior to August 20, 2020, subject to automatic extension of up to a maximum of two additional periods of three months if the required antitrust approvals have not yet been obtained.

The revenues of animal health business for the year 2018 is $1.7 billion with an adjusted EBITDA margin of 23% for 2018. The consummation of the transaction is subject to the satisfaction of certain customary closing conditions, regulatory approval, antitrust approvals, execution of certain ancillary agreements, approval to list the consideration shares on the New York Stock Exchange, the absence of any law or order enjoining or otherwise prohibiting the transaction in specified jurisdictions and other conditions. As on December 9, 2019, Elanco received a request for additional information from the FTC in connection with the FTC's review of the transaction. The effect of the second request, which was anticipated as part of the regulatory process, is to extend the waiting period imposed under the HSR Act until 30 days after the parties have substantially complied with the second request, unless the waiting period is extended voluntarily by the parties or terminated sooner by the FTC. Elanco continues to work cooperatively with the FTC. On January 9, 2020, Elanco received unconditional antitrust clearance from the Chinese competition authority (the State Administration for Market Regulation or “SAMR”) for the acquisition. Antitrust reviews are ongoing in other jurisdictions around the world. As of February 12, 2020, any proposed remedy and final clearance for the Elanco/Bayer transaction remain subject to review and approval from regulatory authorities. As of March 24, 2020, Elanco has received regulatory clearance in China, Colombia, Turkey and the Ukraine, and is continuing to collaborate with other key jurisdictions. The transaction has been approved by European Commission. The transaction was approved by Brazilian antitrust clearance. As of July 8, 2020, Australian Competition and Consumer Commission approved the acquisition. The transaction is expected to close in mid-2020. Additionally, the purchase agreement provides that the closing will not occur prior to July 1, 2020. The transaction is expected to close on July 1, 2020. As of June 8, 2020, the transaction is expected to be completed on August 3, 2020. The deal is accretive to adjusted earnings per share in first full year post-close and high single to low double-digit accretion in second year, post-closing for Elanco.

Chris Janssen, Chris Swiecicki, Bob Bartell and Andreas Stoecklin of Duff & Phelps acted as financial advisors and provided fairness opinion to the Board of Directors of Elanco. Marshall Smith, Peter van der Goes and Naomi Leslie of The Goldman Sachs Group, Inc. (NYSE:GS) acted as financial advisors to Elanco. Barnes & Thornburg LLP, Tarun Stewart, Ariel Deckelbaum, Thomas de la Bastide, David Huntington, Caith Kushner, Andrew Forman, Rick Rule, Marta Kelly, Jonathan Ashtor, Scott Sontag, David Brown, Roberto Gonzalez, Richard Elliot, Kripa Raman, Andrew Gaines, Jason Ertel, Mitchell Berg and William O'Brien of Paul, Weiss, Rifkind, Wharton & Garrison LLP, Maximilian Schiessl, Christian Möller, Hendrik Bockenheimer, Wolfgang Kellenter, Matthias Scheifele, Dirk Uwe, Markus Ernst, Benedikt Migdal, Eckbert Müller, Oda Goetzke, Marc Seeger, Tianyuan Zhuang, Johannes Fütterer, Benedikt Statz, Alexander von Bernstorff, Yenilee Icagic, Susanne Koch, Julia Fischer, Norman Koschmieder Marius Mayer and Sebastian Heinrichs of Hengeler Mueller acted as legal advisors to Elanco. John Boyce of Slaughter and May acted as legal advisor for Elanco. Frederic Mirza Khanian, Simon Dürr, Ulrich Fleischer, Hao Chu, dr. Arne Pidun, Marc Peisert, Johannes Feddersen, Ursula Braun, Janaina Kutzner, Sally Trivino and Chirag Oberoi of PricewaterhouseCoopers acted as legal advisors and Matthew Hurd, Carsten Berrar and Evan Simpson of Sullivan & Cromwell LLP, Daniela Seeliger, Ingo Klauß, Thomas McGrath, Antonia Sherman of Linklaters Oppenhoff & Rädler and William Huynh, Roman Seifert of Linklaters LLP (USA) acted as legal advisors for Bayer Aktiengesellschaft. Bank of America Merrill Lynch International Limited and Credit Suisse AG acted as financial advisors to Bayer. Mattos Filho, Veiga Filho, Marrey Jr e Quiroga Advogados acted as legal advisors to Elanco. Rajat Mukherjee, Ranjini Gogoi and Sarthak Sarin of Khaitan & Co. acted as legal advisor to Elanco Animal Health Incorporated (NYSE:ELAN).

Elanco Animal Health Incorporated (NYSE:ELAN) completed the acquisition of Bayer Animal Health GmbH, KVP Pharma+Veterinär-Produkte GmbH and other animal health business in Germany and United States of America from Bayer Aktiengesellschaft (DB:BAYN) on August 1, 2020. Bayer Aktiengesellschaft received $5.17 billion in cash and received approximately 72.9 million Elanco Animal Health Incorporated shares. The issued shares will be subject to lock up, where Bayer cannot sell any shares for the first 90 days. In the second 90 days, 50% of shares are eligible for sale and the remainder may be sold after 180 days. As part of integration Sarena Lin, executive vice president of Transformation and Technology will depart from Elanco Animal Health and will take a role outside of Elanco Animal Health at the end of January.