China has the world’s third-largest number of cat and dog owners. Keeping pets flea-free is a priority. Acquisitive Chinese investment group Fosun International is reportedly on the lookout for ways to capitalise on the trend by considering a bid for the animal health business of German chemicals company Bayer, known for flea-and-tick fighter Advantage. The unit would be an appealing asset — but it could prove costly for Fosun.
Bayer has good reason to sell. Shareholders are impatient for action following problems it has encountered since its controversial $63bn takeover last year of US seeds and chemicals group Monsanto. US court cases linking a Monsanto weed killer to cancer have opened up the possibility of billions of dollars in damages. Bayer’s shares have fallen 45 per cent in the past year and trade at a near seven-year low. Selling the animal health business would be part of a wider restructuring process.
For Fosun, it is a good time to expand an animal health business. In China, spending on pets is expected to reach $7bn by next year, according to consultancy Euromonitor. While general spending on pets has increased, the amount spent on pet healthcare has lagged. Medical care costs are a fifth of the total — compared to over a half in the US. That leaves ample room for growth.