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Eli Lilly To Divest Remaining Stake In Elanco Animal Health Via Exchange Offer

Eli Lilly and Co. (LLY) said Friday that it will initiate an exchange offer today to divest its remaining interest in Elanco Animal Health Inc. (ELAN).

Elanco completed its initial public offering or IPO in September 2018, with Lilly retaining an 80.2 percent ownership interest in Elanco.

Lilly noted that in the exchange offer, its shareholders can exchange all, some or none of their shares of Lilly common stock for shares of Elanco common stock owned by Lilly, subject to possible proration.

The company expects the exchange offer to be tax-free for participating Lilly shareholders in the U.S., except with respect to cash received in lieu of fractional shares. To permit the exchange offer to occur, Lilly said it has received a waiver of the 180-day lock-up from the joint lead book-running managers of the IPO.

"We were encouraged by the demand for the IPO and have been pleased with Elanco's performance. It's the right time to finalize the separation, let Elanco chart its future as a standalone company, and focus Lilly on our core mission to create human medicines that make life better for people around the world," said David Ricks, Lilly's chairman and chief executive officer.

According to Lilly, the exchange offer is designed to permit its shareholders to exchange their shares of Lilly common stock for shares of Elanco common stock at a 7 percent discount, subject to an upper limit of 4.5262 shares of Elanco common stock per share of Lilly common stock.

If the upper limit is not in effect, tendering shareholders would receive approximately $107.53 of Elanco common stock for each $100 of shares of Lilly common stock accepted in the exchange offer.

Lilly noted that these values will be determined by reference to the simple arithmetic average of the daily volume-weighted average prices of Lilly as well as Elanco common stock on the New York Stock Exchange during the three consecutive trading days ending on and including the second trading day preceding the expiration date of the exchange offer, which would be March 4, March 5, and March 6, 2019, if the exchange offer is not extended or terminated.

The completion of the exchange offer is subject to certain conditions, including: at least 146.645 million shares of Elanco common stock being distributed in exchange for shares of Lilly common stock validly tendered in the exchange offer; and the receipt of an opinion of counsel that the exchange offer will qualify for tax-free treatment to Lilly and its participating shareholders.

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