Elanco Animal Health to Sell Aqua Business for $1.3 Billion

Elanco Animal Health Inc. has announced its agreement to sell its aqua business to Merck Animal Health for a whopping $1.3 billion in cash. The Greenfield-based company revealed that the sale amount is approximately 7.4 times the estimated 2023 revenue of the Elanco aqua business, which includes a range of products catering to warm-water and cold-water species, such as salmon vaccines.

This strategic move will enable Elanco to focus its investments on larger markets with higher earnings potential in the medium and long term, providing the company with greater balance sheet flexibility, according to Elanco's President and CEO, Jeff Simmons.

In 2023, the aqua business generated approximately $175 million in revenue. The divestiture includes current marketed brands, ongoing aqua R&D projects, as well as the transfer of manufacturing sites in Prince Edward Island, Canada, and Dong Nai, Vietnam. Moreover, around 280 commercial and manufacturing employees will be part of the transfer.

By utilizing the proceeds from the sale, Elanco plans to reduce its debt and lower interest costs by approximately $65 million per year, which translates to 11 cents per share earnings. The deal is expected to be finalized around mid-year.

Elanco's stock experienced a premarket surge of 4.9%, bringing its overall 12-month gain to 6.2%. In comparison, during the same period, the S&P 500 saw a growth of 19.9%.