Citi Maintains Hold Rating On LLY

Citi is maintaining its Hold rating on shares of Eli Lilly LLY.

“Eli Lilly made an offer to purchase Johnson & Johnson's JNJ (Janssen) Animal Health Business,” Citi writes. “The Janssen business consists of ~50 products, mostly for swine & poultry, with a geographic presence in 11 countries, mostly in Europe.

“JNJ indicated that the business accounts for <1% of ex-US sales, or <$320M. Terms of the offer were not disclosed; however, we would expect LLY's offer to be ~2x sales, in-line with its last two animal health transactions (purchase of PFE/WYE animal health assets & Posilac from Monsanto).

“We view Janssen's animal health business as complementary to LLY's Elanco business broadening its geographical footprint. JNJ's acceptance period for the offer expires in late 2Q11 unless extended. LLY expects to double sales of its animal health business over the next few years. We currently model 2011E animal health sales of $1.6B (+13% YOY), growing to $2.0B in ‘15E (+7% '10-‘15E CAGR). We maintain estimates and Hold rating on LLY's shares.”

Eli Lilly closed Monday at $34.73.