Bank Of America Downgrades Elanco Animal Health, Says Too Much Uncertainty Around Bayer Deal

Last week, Elanco Animal Health Incorporated (NYSE: ELAN) announced plans to acquire Bayer’s (OTC: BAYRY) Animal Health business for $7.6 billion.

Although the deal was widely expected, and some details are better than expected, there are questions around the deal that are unlikely to be answered anytime soon, according Bank of America.

The Analyst

BofA’s Michael Ryskin downgraded Elanco Animal Health to Neutral while establishing a new price target of $30.

The Thesis

The purchase price of Elanco Animal Health’s deal to acquire Bayer’s Animal Health business is much lower than what some reports had speculated, Ryskin said in the note.

Mentioning other positives of the deal, the analyst said the combined entity’s margin profile is better than anticipated, while the headwinds to growth would likely be less than expected.

The deal could cause some near-term hurdles but is expected to “potentially turn out quite positively in the out-years,” Ryskin wrote. He added, however, that there is significant uncertainty, such as which parts of the portfolio will be divested to take care of antitrust issues and what is the “true go-forward growth rate of the business.”

These questions are likely to remain unanswered until the deal draws nearer to a close, which is expected in mid-2020. Ryskin recommended moving to the sidelines while waiting for more clarity on the deal.

Price Action

Shares of Elanco Animal Health had declined 1.8% to $25.91 at time of publishing.

Related Links:

Elanco To Acquire Bayer's Animal Health Business For .6B

Benzinga's Top Upgrades, Downgrades For August 26, 2019

Latest Ratings for ELAN

Aug 2019		Downgrades	Buy	Neutral
Aug 2019		Upgrades	Sell	Neutral
May 2019		Initiates Coverage On		Neutral

View More Analyst Ratings for ELAN
View the Latest Analyst Ratings

See more from Benzinga

• KeyBanc Upgrades Inovalon, Remains Bullish On Future Expectations

• DA Davidson Out Bullish On Landec: 'We Can Justify A Constructive Stance'

• Hormel Foods To Continue Navigating Rough Waters In Near Term, BMO Says

© 2019 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.