Merck’s $2.4bn acquisition of Antelliq

By Orlando Poraqi, Maria Lovin, Iulian Paval and Adam Butlin (Bocconi University and UCL) - Date: 13/03/2019

Overview of the deal

  • Acquirer: Merck & Co. (NYSE: MRK)

  • Target: Antelliq Group

  • Estimated value: $3.7bn

  • Announcement date: 14th December 2018

  • Acquirer Advisors: Barclays, Centerview Partners

  • Target Advisors: Goldman Sachs, Rothschild & Co.

Merck & Co. and privately held Antelliq Group announced on 14th December last year an all-cash deal under which Merck will wholly acquire Antelliq. Merck is paying about $2.37 bn to acquire 100% of outstanding shares of Antelliq. It is also assuming Antelliq’s debt of $1.3 bn which is set to be repaid shortly after deal close which is expected in Q2 2019, subject to regulatory approval. Antelliq produces 500 million animal sensors annually to provide identification, monitoring, and traceability for vets, farmers and pet owners in more than 100 countries. It is at the forefront of the movement towards combining animal intelligence and animal health industries through its extensive suite of digitally connected identification and monitoring technologies. The business was acquired by BC Partners from Electra Partners in 2013 for $1.3bn. BC Partners’ global network has been critical to Antelliq’s international expansion

Antelliq is a unique business which played a pivotal role in driving forward the convergence of the animal intelligence and animal health industries globally. We are proud of the transformation of the company that we initiated together with a fantastic leadership team over the past five years and believe that Merck is an ideal partner for Antelliq to support the next stage of growth.” - Jean-Baptiste Wautier, chairman of Antelliq

Company Details (Merck & Co.)

Merck & Co., MSD outside the US, is an American pharmaceuticals company - 7th largest globally by market cap and revenue - which operates in over 140 countries providing prescription medicines, vaccines, biological therapies and animal health product. Merck Animal Health (MAH) brought in sales of $3.9 billion in 2017.

- Founded in 1917 and headquartered in Kenilworth, NJ, US

- Chair and CEO: Kenneth C. Frazier

- Number of employees: 76,000

- Market Cap: $206bn - EV: $222.5bn

- LTM Revenue: $42.3bn - LTM EBITDA: $13.1bn

- LTM EV/Revenue: 5.3x - LTM EV/EBITDA: 17x

Company Details (Antelliq)

Antelliq, previously Allflex Group, is a French animal healthcare technologies company, majority owned by leading European private equity firm BC Partners. Antelliq is a global leader in digital animal monitoring, with its flagship livestock identification product Allflex.

- Founded in 1849 and headquartered in Vitré, France

- Chair: Jean-Baptiste Wautier CEO: Stefan Weiskopf

- Number of employees: 1,900

Projections and Assumptions

Short term consequences

Merck’s stock price fell by 2.5% to $76.48 on the news of the acquisition, possibly due to concerns of Antelliq’s debt. Nevertheless, Antelliq made $405.9m in sales to 30th September 2018, and this acquisition will endow Merck with a large and well-established global customer base for future agtech products.

MAH has been expanding rapidly in recent months, investing in new manufacturing and warehousing facilities across the US and UK in paticular, to increase production capacity. Merck continues to acquire smaller agtech companies to expand its broad portfolio of products to meet rapidly growing demand in this sector, bucking the trend of divestment of human-focused pharmaceutical giants away from animal healthcare. Antelliq has pioneered livestock technologies and will allow Merck to capitalise on the growing market for identification and monitoring technologies. As animal welfare, and food safety standards continue to rise - the global food traceability market accounted for $11.3bn in sales in 2017 – digital animal monitoring is set to become a highly profitable area of expansion for Merck. More specifically, given Merck’s dominance of the animal vaccine market, it seems that the monitoring technologies offered by Antelliq could greatly enhance Merck’s customers’ ability to predict and monitor diseases in real-time, no doubt a key factor behind Merck’s rationale for the timely acquisition.