Elanco Animal Health agrees to sell aqua business to Merck for $1.3 billion in cash

Elanco Animal Health Inc.
ELAN,
-0.41%
said Monday it has agreed to sell its aqua business to Merck Animal Health
MRK,
+0.02%
for $1.3 billion in cash. Greenfield, Ind.-based Elanco said the sum is equal to about 7.4 times the estimated 2023 revenue of the Elanco aqua business, which includes products across warm-water and cold-water species such as salmon vaccines. The deal “allows us to prioritize our investments in larger markets with greater earnings potential over the medium and long term, while creating balance sheet flexibility,” said Jeff Simmons, president and CEO of Elanco Animal Health, in a statement. The aqua business had about $175 million in revenue in 2023. The divestiture includes current marketed brands, aqua R&D projects, the transfer of manufacturing sites in Prince Edward Island, Canada and Dong Nai, Vietnam and about 280 commercial and manufacturing employees. Elanco will use the proceeds of the deal to pay down debt and reduce its interest costs by about $65 million a year, or 11 cents of per-share earnings. The deal is expected to close around mid-year. Elanco’s stock was up 4.9% premarket and has gained 6.2% in the last 12 months, while the S&P 500
SPX,
+1.07%
has gained 19.9%.