GREENFIELD, Ind .– (COMMERCIAL THREAD) – Elanco Animal Health Incorporated (NYSE: ELAN) today announced its first business restructuring just two months after closing its acquisition of Bayer Animal Health. The company also noted that it had started deleveraging by making a $ 100 million payment on its term loan.

Elanco’s management quickly assessed the combined company’s capabilities, structure and staffing needed to achieve its goal of being an agile and responsive global leader dedicated exclusively to animal health. As part of this effort, the company today announces its intention to cut more than 900 positions in nearly 40 countries, primarily in sales and marketing, but also in R&D;, manufacturing and quality, and support. back office. These actions begin to reduce duplication, increase efficiency and optimize the company’s footprint in all geographies, particularly in Basel, Switzerland.

The initiatives described are the first phase of Elanco’s disciplined process to capture greater value. These efforts build on Elanco’s productivity program in its innovation, portfolio and productivity (IPP) strategy, which has included the consolidation of suppliers and subcontractors.

“The team quickly applied our historic integration experience to move forward with speed and determination and capture the initial synergies even during the ongoing challenges created by the COVID-19 pandemic, ”said Jeff Simmons, President and CEO of ‘Elanco. “After our first view of the combined business, we are fully confident in achieving synergies of $ 275-300 million, with the first two-thirds occurring within the first 30 months. Today’s actions will reduce duplication and increase efficiency within our global footprint, as the team builds long-term plans around sourcing savings, SKU optimization and streamlining. manufacturing processes. While decisions that affect our employees are always difficult, we remain committed to treating affected employees with our guiding value of respect and following all local consultation processes.

The cost of the proposed actions is expected to be between $ 190 and $ 210 million with approximately $ 170 to $ 190 million in severance pay and approximately $ 20 million in asset write-downs and other charges. As part of the transaction with Bayer AG, $ 35 million was reflected in the purchase price attributable to the costs of restructuring Elanco. Severance pay in cash will be spread over the next two years. Elanco expects to incur restructuring charges of $ 130 million to $ 145 million in the third quarter of 2020, as well as $ 40 to 45 million in the fourth quarter of 2020. The remaining estimated $ 20 million will be incurred in 2021. Elanco plans to Achieving at least $ 100 million in annual compensation achieves savings toward the planned synergy target of $ 275 million to $ 300 million.

“We see the logic of the deal come to life as we bring our long-standing focus on the veterinarian together with Bayer’s direct-to-consumer expertise to open up new opportunities, especially given the increased desire of owners. animals to access care and products via online, retail, at and directly to Door Channels, ”said Simmons. “Our team is focused on making tough decisions that quickly generate value while enabling our strategies for innovation and growth. More importantly, the rapid evolution of our business areas means that we now have a bigger and stronger team in place to help clients improve our overall business competitiveness. The actions proposed today will ultimately allow us to better advocate for our customers and provide solutions to their greatest unmet needs.

Debt reduction begins

Elanco has also started to repay its loan which financed the acquisition of Bayer Animal Health. On September 25, Elanco repaid $ 100 million of its $ 4.275 billion B term loan.

“With the acquisition closing and working capital requirements established, we have sufficient liquidity to begin deleveraging with strong cash flow in Q2 2020, ”said Todd Young, Executive Vice President and Chief Financial Officer of Elanco. “We will continue to repay debt from our operating cash flow in 2021, focusing on our $ 500 million note, which is due in August 2021. ”

ABOUT ELANCO

Elanco Animal Health Incorporated (NYSE: ELAN) is a global leader in animal health dedicated to innovating and providing products and services to prevent and treat disease in farm and companion animals, creating of value to farmers, animal owners, veterinarians, stakeholders and society as a whole. With nearly 70 years of animal health heritage, we are committed to helping our customers improve the health of the animals they care for, while having a significant impact on our local and global communities. At Elanco, we are guided by our vision of Enriching Life through Food and Companionship and our Elanco Healthy Purpose ™ CSR framework – all to advance the health of animals, people and the planet. Learn more about www.elanco.com.

This press release contains forward-looking statements (as that term is defined in the Private Securities Litigation Reform Act of 1995) regarding expected cost savings, our ability to generate synergies as a result of our recent acquisition of Bayer Animal Health, and expected charges relating to the restructuring, and reflects Elanco’s current belief. Forward-looking statements are based on our current expectations and assumptions about our business and other future conditions. Because forward-looking statements relate to the future, by their nature they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Therefore, our actual results may differ materially from those contemplated by forward-looking statements. For a more in-depth discussion of these and other risks and uncertainties, see Elanco’s most recent documents with the United States Securities and Exchange Commission. Unless required by law, Elanco does not undertake to update forward-looking statements to reflect events subsequent to the date of this press release.