Elanco to pay down term loan B borrowings with asset sale proceeds

By Sara Rosenberg

New York, Feb. 5 – Elanco Animal Health Inc. plans to pay down a portion of its term loan B using the expected $1.05 billion to $1.1 billion after-tax cash proceeds from the sale of its aqua business to Merck Animal Health, according to a news release.

Elanco’s preliminary full-year 2023 results, which do not include the effect of the sale of the aqua business, project net debt to adjusted EBITDA to be slightly below the midpoint of the company’s previous guidance range of 5.5x to 5.8x. However, giving pro forma effect to the transaction for the full-year 2023, including the expected debt paydown and excluding the EBITDA associated with the aqua business, the company estimates the net leverage ratio would have been at or slightly below 5x.

In 2024, with the anticipated debt paydown resulting from the transaction and from cash generated by the base business, the company expects to end the year with net debt to adjusted EBITDA in the mid-4x range, and the company expects net debt to adjusted EBITDA in the high-3x to low-4x range by the end of 2025, driven by innovation fueled growth and continued debt paydown from improving free cash flow.

Under the agreement, Merck Animal Health is buying the aqua business for about $1.3 billion in cash.

Closing is expected around mid-year, subject to regulatory approvals and customary conditions.

Elanco Animal Health is a Greenfield, Ind.-based animal health company that develops products and knowledge services to prevent and treat disease in food animals and pets.

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