Elanco Animal Health Inc. has completed the divestiture of its aqua business to Merck Animal Health for approximately US$1.3 billion in cash, with approximately US$1.05 billion to US$1.1 billion in net proceeds available for debt paydown in the third quarter of 2024.
Elanco’s plan to sell its aqua business was announced in February.
"Finalizing this transaction marks a significant milestone in concentrating our focus on high-value opportunities in pet health and livestock sustainability while creating balance sheet flexibility. Elanco's positive trajectory, demonstrated by three consecutive quarters of underlying revenue growth, pipeline progress, and our ability to reduce debt, strengthens our value proposition," said Todd Young, executive vice president and chief financial officer of Elanco Animal Health. "The proceeds from this transaction, combined with increased free cash flow from our operations, accelerates our deleveraging and positions us to deliver substantial value over time."
The successful completion of this transaction enables the company to pay down term loan debt on a pro-rata basis per the terms of the company's credit agreements. Combined with the expected US$280 million to US$320 million of cash generated from the base business, the company expects to pay down approximately US$1.3 billion to $1.4 billion of debt in 2024, ending the year with net debt to adjusted EBITDA in the mid-4x range. Net debt to adjusted EBITDA is projected to improve further in 2025 to the high-3x to low-4x range. The company will provide additional information about the transaction’s impact on its 2024 financial outlook during the second quarter earnings call in August.
