If Bayer Expands In Animal Healthcare, Zoetis Is Obvious Choice

If German pharma company Bayer AG (ADR) BAYRY wants to expand in animal healthcare, it may need to acquire Zoetis Inc ZTS, according to Bloomberg Gadfly columnist Tara Lachapelle. http://www.bloomberg.com/gadfly/articles/2016-04-15/bayer-s-wish-list-zoetis Lachapelle said "if Bayer wants to have a strong position in this space, at this point, go big or go home. That means Zoetis." "It's a company whose sales analysts project will grow at around 5 percent a year for the next few years, although Zoetis said that changes it's making -- such as SKU reductions -- will mask operational growth in 2016. Shares of Zoetis also command a far richer multiple than Bayer's do," Lachapelle wrote. However, Lachapelle is concerned about Bayer's affordability and said Bayer needs to shed some assets to buy Zoetis. "Bayer is valued at about $99 billion, has $20.8 billion of debt and only $2 billion of cash. Net debt is equal to 1.8 times the Ebitda it generated last year. In other words, it may need to sell something else to make a purchase as large as Zoetis," Lachapelle elaborated. Last month, a Reuters report said Monsanto Company MON has expressed interest in Bayer's crop science unit, including a potential acquisition worth more than $30 billion. http://www.reuters.com/article/us-bayercropscience-m-a-monsanto-exclusi-idUSKCN0WK2T9 Lachapelle noted that the $30 billion price is "enough for Zoetis, which would cost a little more than $30 billion with a typical takeover premium." Shares of Zoetis, which was spun off from Pfizer Inc. PFE in 2013, were up 0.27 percent to $47.80. ADRs of Bayer rose 0.21 percent to $119.22.