Eli Lilly has confirmed it will buy Swiss drugmaker Novartis AG's animal health business for $5.4 billion in cash to strengthen and diversify its Elanco unit.

Lilly said it plans to fund the deal with about $3.4 billion of cash on hand and $2 billion of loans. The company did not disclose any other financial terms of the deal.

"Animal health continues to represent an attractive growth opportunity for Lilly. We intend to keep Elanco and to take advantage of the substantial synergies between our animal health and human health businesses," Lilly's chief executive John Lechleiter said.

Lilly expects cost savings of about $200 million per year within three years of closing the deal. It also expects the purchase to add to its profit on a cash basis from 2016, excluding integration costs.

Lilly said the deal is not expected to change its dividend policy or current share repurchase programme.

BofA Merrill Lynch is acting as financial adviser and Weil, Gotshal & Manges LLP is the legal counsel to Lilly. Goldman Sachs is acting as financial adviser to Novartis, while Freshfields Bruckhaus Deringer is its legal counsel.

Seperately, Novartis said it agreed to buy GSK's oncology products for $14.5 billion. The deal also includes up to $1.5 billion in milestone payment. The Swiss drugmaker said it would sell its vaccines business, excluding its flu business, to GSK for $7.1 billion plus royalties.

Reuters