German drug company Bayer said US-based Elanco Animal Health agreed to acquire Bayer’s animal health business in a transaction valued at $7.6 billion.

The $7.6 billion consists of $5.3 billion in cash, subject to customary purchase price adjustments, and $2.3 billion in Elanco stock

Bayer said it intends to exit its stake in Elanco over time.

The deal is the latest in the fast-growing animal health market which has seen Elanco floated by Eli Lilly and Pfizer spinning off its veterinary medicine business. 

The transaction also adds to the list of assets sold by Bayer as the German company looks to slash debt after its $63 billion takeover of Monsanto last year.

“This transaction enhances our focus as a global leader in life sciences,” said Bayer chairman Werner Baumann.

“We are therefore delivering ahead of schedule on one of the key priorities for driving value creation that we communicated at our Capital Markets Day in December 2018.”

Elanco CEO Jeffrey Simmons said: “I have tremendous respect for the Bayer Animal Health team and their shared passion for improving the health and well-being of animals.

“Combining Elanco’s strong relationship with veterinarians and Bayer’s leadership in retail and e-commerce will ultimately benefit all our customers.

“We look forward to joining our complementary portfolios and capabilities to build a fully focused animal health company, providing a sustained flow of innovation for farmers, veterinarians and pet owners.”

Bayer’s animal health business had sales of $1.8 billion in fiscal 2018.

Under the agreement with Elanco, all Bayer animal health employees will have at least one year of “employment protection against unilateral termination with similar and no less favorable benefits in the aggregate.”

Bank of America Merrill Lynch and Credit Suisse acted as financial advisors to Bayer, while Sullivan & Cromwell, PwC Legal and Linklaters acted as legal advisors.