Eli Lilly and Company, the parent company of Elanco, announced on Tuesday an agreement to acquire Novartis Animal Health for approximately $5.4 billion in an all-cash transaction that will strengthen and diversify Elanco’s animal health business.  The transaction is not expected to be concluded until the first quarter of 2015.  Until then, both Elanco and Novartis will continue to operate as separate companies.  Once the transaction is completed, Elanco would be the second-largest animal health company in global revenue.

Novartis Animal Health has a presence in approximately 40 countries and 2013 revenue of approximately $1.1 billion.  Eli Lilly will acquire Novartis Animal Health’s nine manufacturing sites; six research and development facilities; a global commercial infrastructure with a portfolio of approximately 600 products; a robust pipeline with more than 40 projects in development; and an experienced team of more than 3,000 employees, according to an Eli Lilly press release.

Jeff Simmons, senior vice president of Eli Lilly and Company and president of Elanco Animal Health, said in a web conference with media and investors on Tuesday, that the acquisition will create multiple synergies in terms of product lines, human capital, research and development, and geographic market penetration.  The acquisition also provides Elanco with a greater commercial presence in the companion animal and swine markets, expands Elanco’s presence in the equine and vaccines areas, and creates an entry into the aquaculture market.

“This deal creates a global animal health leader able to deliver even more innovation and value to our customers,” Simmons said in the press release.  “Combining these two great companies will enable us to provide more diversified brands; reach more market segments; expand our global footprint; and strengthen our pipeline, capabilities, and expertise.”

“Lilly emerged from our competitive process as the clear best buyer for Novartis Animal Health and a good home for our employees,” said Joseph Jimenez, CEO of Novartis.  “We look forward to a smooth transition of the business over the next several quarters.”