Merck & Co., Inc. (MRK - Free Report) announced that it has reached a definitive agreement to acquire all the outstanding shares of French animal health company Antelliq Group for a reported 2.1 billion euros ($2.38 billion) in cash. Merck will also bear Antelliq’s debt of 1.15 billion euros ($1.30 billion), which will be repaid upon closure of this transaction.
The takeover is expected to close in the second quarter of 2019, subject to customary closing conditions and the clearance by antitrust and competition law authorities.
Antelliq is a leading provider of digital animal identification, traceability and monitoring services to the animal health industry. The company generated sales of 360 million euros during the 12-month period ending September 30.
The acquisition is a good strategic fit for Merck as this will help it gain an access to a broader customer base and strengthen its Animal Health segment.
Shares of Merck have rallied 35.9% so far this year, outperforming the industry’s increase of 5%.
Over the years, Merck has seen consistent growth in its Animal Health segment and the buyout of Antelliq will complement the same to generate long-term growth. Merck's Animal Health products have contributed almost 10% to its total revenues.
During the first nine months of 2018, Merck’s Animal Health segment generated sales of $3.17 billion, reflecting an increase of 9.7% year over year. This upside was driven by high sales of Merck’s companion animal products and livestock products, particularly ruminant and poultry products.
Merck is actively seeking acquisitions to build its long-term portfolio. The company inked several licensing deals in the past few years and targets to snap up more such collaborations in the future. The June 2018 takeover of Australian company Viralytics Limited added Cavatak, the latter’s experimental oncolytic immunotherapy, to Merck’s cancer pipeline.
Meanwhile, in July 2017, Merck signed a profit-sharing contract with AstraZeneca (AZN - Free Report) , which added two key assets (Lynparza/selumetinib) to its oncology pipeline. Similarly, in March 2018, Merck struck a deal with Japan’s Eisai to co-develop and commercialize the latter’s tyrosine kinase inhibitor, Lenvima, for several types of cancer.
Zacks Rank & Other Key Picks
Merck currently carries a Zacks Rank #2 (Buy). Other top-ranked stocks in the large cap pharma sector include Bristol-Myers Squibb Co. (BMY - Free Report) and Eli Lilly and Co. (LLY - Free Report) . While Bristol-Myers sports a Zacks Rank #1 (Strong Buy), Lilly carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Bristol-Myers’ earnings estimates have been revised 6.3% upward for 2018 and 5.1% for 2019 over the past 60 days.
Lilly’s earnings estimates have moved 2% north for 2018 and 0.2% for 2019 over the past 60 days. The stock has surged 32.6% year to date.
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