Eli Lilly Exchange Offer – February 2019

Eli Lilly, Elanco Exchange Offer

Elanco was the Animal Health division that was spun-off from Eli Lilly (LLY) in September 2018 through an Initial Public Offering (IPO). Post-IPO, LLY still retained a 80.2% stake in Elanco, a position which they are now trying to fully exit. To avoid substantially moving the stock price of Elanco and with time constraints with selling shares in the secondary market, the exchange offer that is proposed is much more efficient.

To entice shareholders to tender their LLY shares for Elanco shares, LLY is offering Elanco shares at a 7% discount to shareholders. For every $100 of LLY shares owned, investors would receive $107.53 worth of Elanco. This exchange offer is subject to an upper limit of 4.5262 shares of Elanco for every 1 share of LLY. Additionally, this exchange offer may not go through if LLY is unable to tender at least 146.67M shares of Elanco (they currently own 293.29M shares).

Liberty One will continue to retain our position in LLY rather than in Elanco. We are encouraged by LLY’s decision to divest its Animal Health business to focus on its higher-margin human medicines and prospects on developing medicines for high unmet medical needs. Additionally, Elanco does not currently pay a dividend which fails one of the screening criteria in our dividend focused portfolios. In summary, we will not be tendering any shares for your portfolio(s).

You do not need to take any action at this time.

If you have any questions about this offer or any changes in your Liberty One portfolio(s), or would like to learn more, please contact your financial advisor.

Thank you for your continued trust and confidence!

Liberty One Investment Management, LLC is a Registered Investment Advisor with the SEC. Liberty One Investment Management’s ADV Brochure, which serves as Liberty One’s primary disclosure document, is available upon request at no charge or may be obtained directly from Liberty One Investment Management’s website at www.libertyoneim.com. An investment in any Liberty One strategy involves risk of loss, including principal, as well as the potential for gain. Before investing, consider the investment objective, risk tolerance, potential for loss of principal, fees, and expenses. Past performance is no guarantee of future results. Diversification and asset allocation do not ensure a profit or guarantee against loss. Liberty One Investment strategies may lose value, are not FDIC/NCUA insured. Liberty One strategies are not suitable for all investors.

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