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Lachapelle: If Bayer Expands In Animal Healthcare, Zoetis Is Obvious Choice

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If German pharma company Bayer AG (ADR) (OTCMKTS:BAYRY) wants to expand in animal healthcare, it may need to acquire Zoetis Inc (NYSE: ZTS), according to Bloomberg Gadfly columnist Tara Lachapelle.

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 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 (NYSE: MON) has expressed interest in Bayer's crop science unit, including a potential acquisition worth more than $30 billion.

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. (NYSE: PFE) in 2013, were up 0.27 percent to $47.80. ADRs of Bayer rose 0.21 percent to $119.22.

Posted-In: Biotech News Health Care Rumors Asset Sales M&A General

 

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