Merck Beefs Up Animal Health Unit with $2.4B Antelliq Acquisition
Merck has agreed to pay nearly $2.4 billion to acquire Antelliq Group, a privately held French company that makes devices used in monitoring and tracking animals.
In addition to the cash payment, Merck (NYSE: MRK) said it will assume Antelliq’s approximately $1.3 billion debt, which it plans to repay shortly after the deal closes. After the acquisition is complete, Antelliq will operate separately within Merck’s animal health division, the company said.
Merck’s Antelliq acquisition bucks the trend among large pharmaceutical companies, which have been shedding their animal health operations to focus on human health. In 2013, Pfizer (NYSE: PFE) spun out its animal health division Zoetis (NYSE: ZTS) in a $2.2 billion IPO. Novartis (NYSE: NVS) sold its animal health business to Eli Lilly (NYSE: LLY) in 2014 for $5.4 billion; Lilly then combined it with its own animal business, Elanco. In September, Lilly spun off Elanco as an independent company in a $1.5 billion IPO.
Antelliq traces its origins trace to New Zealand, where in 1955, two farmers used plastic ear tags to identify livestock, according to the company’s website. The resulting business, Allflex, was acquired by French company SFII in 1989. Beyond livestock, Allflex Group went on to develop tagging technologies for fish—both wild and those grown in aquaculture—and pets. The company also expanded into digital tracking of animals with technologies such as radio frequency identification devices.
In 2013, London-based private equity firm BC Partners acquired Allflex for $1.3 billion. Earlier this year, Allflex rebranded as Antelliq.
The global food traceability market accounted for $11.25 billion in business in 2017, according to Statistics MRC. The research firm projects that the market will grow to $20.95 billion by 2026. Factors driving that growth include consumer concern about food safety, growing demand for food in the developing world, stringent export regulations, and penetration of new technologies into supermarkets and other retail locations. Statistics MRC points specifically to RFID technology as an area of growth because it offers tracking capabilities regardless of weather conditions.
During the 12 months ending Sept. 30, Antelliq says it recorded approximately $405 million in revenue. Merck’s animal health business generated $1 billion in revenue in the third quarter of 2018. Through the first three quarters of this year, Merck’s animal health business accounted for $3.1 billion, a 9.1 percent increase compared to the same period in 2017.
Merck says identification and monitoring technologies will assist in disease prediction and treatment. The company adds that Antelliq provides it with an established customer base. Antelliq says it provides more than 500 million animal tags annually in more than 100 countries.
The acquisition is still subject to regulatory approvals. Merck and Antelliq expect the deal to close in the second quarter of 2019.